cintra ipo

Cintra IPO forecast for 28/29 October
! MIG should benefit from positive news flow...
Traffic ramp-up on the M6 Toll will continue to grow. Near term seasonality and
elasticity impacts of toll increases may “cloud” the picture, but investors should
remember there is over 50 years of the concession to run. Combined with the
ability to raise tolls in real terms over the life of the concession that is going to
prove very valuable, in our view.
! Revenue growth on the M6 Toll positive
We expect to see another 20% growth in Sep. revenue/transaction (up 19.5% in
Aug), given a full month's contribution from toll increases (ie: car tolls lifted from
£2 to £3 as at 16 Aug.). Traffic “calming” on A5, A38, A446 & A5195 in early
2005 is likely to encourage more traffic to try the M6 Toll.
! UBS have estimated potential FY 05 distribution to be $0.75
On the basis that the Yorkshire Link sale and the Cintra IPO proceed, MIG could
potentially receive in excess of $2.0bn in proceeds (before costs). We have
estimated the potential cash release possible post costs, and assuming MIG holds
$415m for future equity call requirements, to be $0.75 in FY 05.
! Valuation: Jun 04 $4.00, Jun 05E $3.89 (post Cintra IPO)
We have raised our 12-month price target from $3.50 to $3.90 (in line with our
sum of the parts, DCF FY 05E valuation) reflecting the impact of lower bond
yields and movements in foreign exchange rates. We rate MIG Buy 1.