MIIF - a good target?

Hi All,

I have done a short evaluation on a 9.2% dividend yield target. Sounds good? Perhaps you should peer deep into the numbers to think whether it is really worth its current market value at all.

Read the full story here:
edenadvisors.blogspot.sg/

Your calculation and evaluation have the following doubts.
1. The NAV is much higher than valuation of Hua Nan express, but your valuation for MIIF just ignored this additional portion.
2. The success fees for 77.6m is 15m, but you deduced 29.1m from the sales proceed to be remaining for the shareholder? and for 120m, the success fees is 120m is ~20.2m, but you deducted ~41.1m from the sales to be remaining of the shareholder? and for 137m sales, the success fees is ~23.6m, but you deducted 48 million from the sales proceed, to be remaining for share holder?
3. The divestment of the Hua Nan will required approval from the share holder before it can proceed. If the 77.6m which is 36% less than the valuation, will the shareholder approved for this sales? and based on previous divestment of other actually the sales is much higher than the valuation.

Beside that the following seems still not consider.
1. The success fees will only be pay upon the reaching of threshold value, but the sales of HNE will need approval from shareholder. If the sales amount is not high enough to get the approval from the share holder, than the HNE sales will not be able to proceed and the dividend collection will continue.
2. As there is no performance fees for HNE as compare to previous full MIIF, the cost will be lower, if it continue to operate in this manner, unless the management will be able to make a higher than expected sales for the HNE to closed the MIIF story. And currently will only consist of 1.5% management fees base on investment value of HNE. and HNE performance is improving over years, thus higher dividend over the years is expected if divestment is not proceed.
3. The distribution from HNE to MIIF is 12.5million in 2014, the toll collection will be up to 2026 which have another 12 years. Assuming the toll collection maintain the same over the years, which currently is improving over the years. For 12 x 12.5million which is around 150millions. Thus the expected acceptance sales value should be 150millions or higher if MIIF will be able to make the sales, otherwise there is no motivation for the share holder for approving the divestment.

There is also some interesting information in the FY report, which the share holder have reduced from 7900 to 7400, thus 500 have reduce the share holding, of cause I have increase my holding.

Hi Cheongsl,

Thanks for your comments.
1. The component of the group other assets (including cash) = 10.061m (i have made the slight adjustment for this but it shifts this up to the range of 0.081 cum dividend).

2. I did not deduct 15m only. You must understand that HNE is 81.8% owned by MIIF - not fully owned. Taking 81.8% of the sale price less 15m + the additional other assets gives you 57.917m. (base case).

3. Yes. You are absolutely right with the shareholder approval. I did not take that into account so perhaps the management may not be able to push through a lowball price to get their success fee.

4. Using the 150m metric you have. You will have to discount it as a cash flow over 12 years. I would use a discount rate of 4.5% (1.5% above our 10 year bond - 2.34%). This gives you a value of 118.41m only - basically giving you the base case scenario.

I reiterate my call. Not attractive.

Seems like you did not do your due deligence. The valuation $120m is for the 81% holding of Hua Nan Expressway.
Based on FY2012 before the divestment proposal.
CXP valuation is 100.7million, 38% interest ownership
HNE valuation is 136.5million, 81% interest ownership
TBC valuation is 495.4million, 47.5% interest ownership
Miaoli wind valuation is 0, 100% interest ownership

The TBC is sold S$522millions for the 47.5% ownership. (~5% above valuation)
The Miaoli wind is sold at S$94,768 for the 100% ownership.
CXP is sold at S$111.5million for 38% ownership.(~11% above valuation)
But for HNE you are expecting MIIF to sold only 81.8% of the 81% ownership, so what's the remaining of the 14.7% of the ownership of HNE going to do, I don't think share holder will agreed on partial selling only, it will be either full or no sell.