Some numerical considerations on the Westconnex deal, page-4

As a followup to my previous posts in this thread, this is to specify that I have determined not to take up my entitlements.

My rationale for declining the Offer is as follows:

As I already have ~5% of my portfolio invested into TCL, and by (fully) taking up my entitlements I would increase that allocation to ~6%, I would only want to do so if the expected return on the additional ~1% were better than the expected return on the original ~5% was prior to the Westconnex deal.

Also, because by renouncing (or by selling) my entitlements I will still be paid the differential between prevailing market price and Offer Price, I need to calculate the expected return on the extra ~1% with reference to today’s 11.65$ market price (and not to the 10.80$ Offer Price).

Therefore, the question for me becomes: “Does TCL have a higher expected return today at 11.65$ (based on all the new information available) than it did on Thursday at 12.06$ (before the deal was announced)?”.

Based on the calculations outlined in my previous post (at the start of this thread), using the same Traffic Growth Rate and CPI Inflation assumptions for the Westconnex as for the existing Transurban assets, I have determined that the expected return on the additional ~1% at today’s price would actually be marginally lower. Not only that, but the quality of that expected return would also be somewhat inferior, given that the cashflows in the new aggregate asset portfolio are now more back-loaded into the future and there is additional development risk as well.

So, while I am still comfortable holding a ~5% portfolio allocation in TCL at its current price, I do not see that price as being compelling enough (based on all the new information) to justify increasing that allocation any further.

I would like to emphasise that this is merely my own personal assessment, performed with very limited tools, and I am only posting it for the sake of consistency as a followup to the analysis previously made in this thread. It is by no means intended to influence anyone’s decisions, so I encourage any TCL holders reading it to do their own research, before determining what they want to do with their own entitlements.

Hope this helps, anyway. Cheers.