Cars disappear from motorway

Numbers are falling but Macquarie has jacked up the toll.

December 4, 2007

Danny John, The Sydney Morning Herald

ON THE face of it, a 12 per cent increase in fees to help underpin one of your main revenue drivers would normally come as good news for investors in Macquarie Infrastructure Group.

But when that asset happens to be a toll road where traffic growth has recently stalled, then there's no actual guarantee that the extra cash will flow through as planned.

Such is the case with the M6 user-pays motorway around Birmingham in Britain, which is 100 per cent owned by MIG.

The tolls for cars and trucks are due to rise on January 1, but given that Goldman Sachs JB Were has just reduced its traffic growth forecasts to minus 5 per cent for the current financial year (after a weak last quarter when the numbers were down by 10 per cent on the corresponding period in 2006-07), MIG is unlikely to see much short-term benefit in terms of additional revenue.

Still, MIG needed to do something to put a floor under its lagging share price, which has been seriously underperforming the ASX 200 in recent months and trailed by 11 per cent its discounted cash flow valuation.

The stock has picked up in the last couple of trading days, in part because of the M6 fee announcement but more likely as a result of additional buying over the past fortnight by the Ontario Teachers Pension Plan Board.

The Canadians have just increased their stake in MIG to 11.7 per cent, up from 10.7 per cent from their last notification to the ASX in mid-November.

That's significantly more than the holding of the mother ship, Macquarie Group, which is sitting on 7.54 per cent, and just a touch higher than that of another recent active purchaser, Lazard Asset Management, with its 7.25 per cent interest.

It all makes for an interesting power play if nothing else. MIG's shares closed 3c up yesterday at $3.25.