Ann: Successful Completion of Institutional Entitlement Offer, page-34

An alternative way of looking at it is the following:

1) Because the Entitlements not taken up in the Offer were sold in the shortfall bookbuild at 12.50$, it could be argued that this is the price at which the market first factored in the new set of fundamentals relative to the Citylink and WGT concession, at the then prevailing level of real yields.

2) On that day, the yield of the 2040 Australian Commonwealth Indexed Bond was 0.69%; today, it is 0.76%. I see this 7bp difference in the long-term real yield as being worth approximately 19c/security, or 1.57%, in PV terms; therefore, even if one wanted to use the 12.50$ reference as a benchmark for Fair Value [*], the move in long-term real yields alone does not justify the extent of the TCL security price drop (-4.80%).

3) Plus, underlying fundamentals have further improved since, because of the newly announced approval of the Fredericksburg Extension (FE) in the US. At the negotiated price, I see the minimum Greater Washington Area (GWA) toll revenue increase necessary to make the project value-accretive (i.e. with an IRR greater than the rest of the global portfolio) as being around +17.5%; that is, the FE needs to increase the overall GWA toll revenue by at least 17.5% (from its current levels, i.e. before the additional planned extensions to the GWA portfolio) in order to be value-accretive for the Transurban Group. While this is just a back-of-the envelope estimate, it looks eminently achievable to me, given the nature of the project.

[*]: As I have argued before, even at 12.50$ I see the expected IRR of the securities as being very attractive, on a risk-adjusted basis, and that is without factoring in the FE project.

IMHO & DYOR