macbank buy of the day 08 November 2005MIG: October Traffic Data...

macbank buy of the day 08 November 2005
MIG: October Traffic Data and French Bid Submitted

Macquarie Infrastructure Group (MIG) this morning reported its October traffic data and also announced that it had submitted binding offers to the French Government to buy its stake in toll road companies APRR and SANEF. Macquarie Research Equities (MRE) note that a twist in the bid is the company’s decisions to expand its consortium with the introduction of Macquarie European Infrastructure Fund (MEIF). Whilst the traffic result was slightly better, the focus is on toll road company’s French bid. The market’s reaction to the announcement has been subdued at best, with the stock edging 1 cent higher to $3.38.

Bidding for France was well signalled. MEIF as a member of Macquarie's consortium is playing a similar roll to what it has played with Brussels airport. MEIF itself is a €1.5b European focused fund which has invested approximately €800m of the amount raised. Its current investments include Arlanda Express, Wales & the West Gas, Energy Power, NRE Holdings, Wrightlink, South East Water and Brussels Airport. Its largest investment is Wales and the West at €180m, however it recently provided a commitment of €200m for another Macquarie fund in a European acquisition. MRE also believe the relevant size of any MEIF investment is unlikely to amount to much more than 20% of the fund ie €300m. Thus MEIF potentially provides up to €300m for an investment.

MRE provide the following commentary for each of MIG’s toll road assets:

407 +2.6%: Traffic was up 2.6%, supported by a rebound of weekend traffic +3.6%. While down on recently strong growth of around 6-7%, this remains sound and above the minimum threshold required by the concession. The road is also cycling strong growth due to a lane widening completed in Sep-04. Whilst it appears too early for the effects of higher fuel prices to have been completely absorbed by the market, the strong weekend traffic is encouraging and MRE expect it to continue to improve as fuel prices decline. This trend is common across the other roads
M6 Toll -8.0%: Negative growth is never a good thing, albeit it has been well flagged on the M6 Toll and is no surprise. Total traffic was down -8% and is some comfort from the -10% growth in September. Some of this recovery is due to traffic works commencing on the M6 although they are not as disruptive as the works underway this time last year. Management has indicated there was a more noticeable effect from the road works in the later half of October. M6 Toll growth numbers would be materially effected by the Monday/Friday swing.
Chicago Skyway +3.8%: Total traffic was sound at 3.8%, driven by strong weekday traffic. Weekend traffic was more modest and would most likely be responding to road works which continue on the road. Encouraging non-cash transactions reached 33% during October.
Dulles Greenway -2.0%: The Greenway is still being impacted by the end of road works on the competing roads and possibly the price rise on the feeder road the Dulles Toll Road. Growth was down -2.0%. The Greenway traffic will continue to be clouded by the various road projects occurring along the corridor. MRE expect to see negative growth for the remainder of the year.
Australia +3 - 5%: The Australian roads were sound with growth of 3-5%. M1 was strong up 5.3%, benefiting from a week of free travel on the Cross City Tunnel which add 0.5-1.0% to volume.

MRE’s remain positive on MIG with an outperform recommendation and a 12-month price target of $4.57.