Saturday, March 13, 2010

Analysis of Macquarie International Infrastructure Fund (MIIF)

Macquarie International Infrastructure Fund Ltd (MIIF) is a mutual fund company that has been formed to own, operate and invest in a diversified group of infrastructure businesses around the world.

It offers investors an opportunity to invest in the Macquarie Bank Group’s first listed infrastructure fund in the Asian region and to participate in the public ownership of infrastructure assets.

MIIF's investments include direct investments in airport infrastructure in Belgium and communications infrastructure and renewable energy assets in the United Kingdom. In addition, it will own interests in one unlisted and four listed infrastructure investment funds that have ownership interests in, amongst other things, airports, communications infrastructure, utility and energy assets, water and gas distribution assets and transport infrastructure assets located across the globe.

MIIF was listed on May 2005 at $1 per share. Its first day IPO price was $1.14. It currently trades at $0.525 (14/03/10). No rights shares were issued from its IPO till date.

Below figure A is a screen shot from MIIF 2H 2009 interim report. It shows the portfolio of MIIF:

Figure B shows the corporate structure and investment of MIIF

Figure B

Regular dividend payouts were given since it was listed on SGX

Dividends are paid semi annually, at 3 cents per annum payout, representing a yield of 5.7%. There is a drop in dividend yield over the years due to a larger conservation of cash to lower its corporate level debt (Source: Business Times Singapore May 2009). Arqiva which is the largest revenue contributor of MIIF contributed 62% lesser investment income on 2H 09 (based on 2H 09 interim report). Also, patronages for its China and Europe assets weaken possibly due to financial crisis across the globe.

It’s gearing ratio from 2H 2009 report stands at 63%, considered normal for an infrastructure fund. (Source: Lecture readings: AMP capital Newsletter)

MIIF has a diversified base of infrastructure, which is profitable and commands a high profit margin (before tax) of about 90% based on 2H 09 revenue and net income report.

At current share price of $0.525, book value of $0.80 and yield of 5.7% (before brokerage charges) MIIF presents a good investment opportunity to investors. The global market is set to recover, ease of borrow to resume, thus MIIF is poised to ride the uptrend.

Moreover, management fees of MIIF is a mere 1.5%, compared to many infrastructure unit trusts charging 2% and above for its management fees. As investors can purchase the MIIF on SGX, there is liquidity and transparent pricing of its funds. The brokerage charge is a mere 0.275%, compared to 2%-5% for other non listed unit trust infrastructure funds. All these will add up to a higher return for investors’ portfolio in the long run.