We take a fresh look at PIH (formerly Babcock & Brown Infrastructure) following its massive restructure with a new analyst assuming coverage.
PIH expects FY10 PBT of $81m and available operating cash flow of $133m. Short-term hedging should protect FY10 earnings from the strong A$ but it could be a drag on FY11.
Management flagged a 7.5cps distribution for the quarter ending March 2010, representing an annualised yield of 8.1% based on the current security price of $3.70.
We refrain from valuing PIH until after the half year result is released on 25 February.
A draft discounted cash flow model suggests PIH is mildly overpriced, as do yield based peer comparisons.
High diversification over geographies, markets and regulators minimises risks but PIH may be spread too thin, with small investments in foreign, lesser known markets providing few synergies.
Balance sheet is stretched but not a major concern given support from Brookfield, recovering economies and stronger financial markets.
Not a preferred exposure.
PIH Price at posting:
$3.56 Sentiment: Buy Disclosure: Held
