MIG bashed for value cut

August 22, 2008

Scott Rochfort, The Age

MACQUARIE Infrastructure Group has suffered one of its worst one-day drubbings after the toll-road group slashed the book value of its assets by $1.7 billion.

Securities in MIG closed down 14¢ at $2.49, having slumped as much as 44¢, or 17%, in morning trade, after the company shocked investors by announcing the book value of its portfolio of toll roads had fallen from $10.2 billion to $8.6 billion in the second half. This had led to a fall in MIG's net asset value per share from $4.59 to $3.84. The company blamed the devaluation on changing "risk premiums" on several of its roads.

MIG also said it would sell its 50% stake in Sydney's M7, to help fund the buyback of 10% of its stock. But MIG chief executive John Hughes denied it was part of a wider strategy by Macquarie eventually to delist underperforming funds.

"We've told the market for two-odd years that we're a developer of roads," said Mr Hughes, arguing MIG never intended to hold on to its 50% stake in the M7 for the long term. "It makes good sense to see what value we can crystallise in an economy that's doing really well," he said.

Speculation of a possible privatisation of Macquarie's various infrastructure funds has gathered pace since mid-June, when the investment house announced plans to privatise its underperforming cashbox Macquarie Capital Alliance Group.

The share price fall was exacerbated by MIG reporting a bigger than expected 55% fall in net profit to $767 million. But MIG said its final distribution would be unchanged at 10¢ a security.

The biggest contributor to the $1.7 billion cut in the value of MIG's roads was the slashing of the book value of its stake in Britain's longest toll road, the M6, from $3 billion to $2.2 billion, which was partly blamed on poor traffic numbers.

MIG said it expected to conclude the sale of the Sydney M7 stake — worth $802 million on its books — by January. It is also looking to divest its stake in the Portuguese Lusoponte toll road worth $188 million.

But Mr Hughes rejected speculation MIG could also sell its remaining stake in its various US toll roads. It sold a 50% stake to the unlisted Macquarie Infrastructure Partners in late 2006.