Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
GVK Power and Infrastructure
MIAL stake increase is a positive
�� GVK acquires additional stake of 13.5% in Mumbai Airport from Bidvest
GVK plans to increase its stake in Mumbai International Airport (MIAL) to 50.1%
(currently 36.6%; Bidvest retains a 13.5% stake). Although subject to regulatory
approvals, the transfer is likely to happen in May 2011. We think this is positive as
GVK already has management control and understands the asset very well. We
also believe that there are limited large-scale opportunities in India in the airport
sector. MIAL is GVK’s largest asset, contributing about 37% of our sum-of-theparts
valuation.
�� Media reports suggest a deal value of about US$230m for 13.5% stake
As per the above (exact transaction value not disclosed), the equity value for MIAL
would be US$1.7bn, about in line with our valuation. Some news reports also
suggest a payment of US$287m, which would likely include funding/transaction
costs for GVK. Near-term EPS would reduce due to interest payments (~20%/10%
in our estimate for FY12/FY13-14, assuming an interest rate of 10%), while
operating profit would increase ~70%/40% due to MIAL consolidation (currently
accounted as an associate, holding sub 50%).
�� Funding through debt for three years; PE funding eventually
GVK is looking to finance the deal through a three-year debt. GVK had taken debt
of Rs6.9bn for the Bangalore Airport stake purchase, which has been rolled-over
by one year at an interest rate of 10%. Total debt for stake purchases in both the
airports is about US$380m. GVK has already stated an intention to raise private
equity money in its airport vertical, which will aid in repaying this debt.
�� Valuation: maintain Buy
GVK is our preferred pick among diversified developers. Our Rs50 price target is
based on our sum-of-the-parts valuation
Valuation: Buy with PT of Rs50
Our price target comprises: 1) Rs19 for power; 2) Rs15 for real estate (airport
related); 3) Rs7 for airports (core); 4) Rs7 for the road; and 5) Rs1 for its cash
and investments (at the parent level).
�� GVK Power and Infrastructure
GVK Power and Infrastructure is a leading and diversified infrastructure
developer. Its asset portfolio (attributable) includes: 1) about 2,000MW of
power capacity (including 1,240MW under construction; an additional
2,300MW is planned); 2) two airports (Mumbai and Bengaluru) with maximum
passenger throughput of about 33m; 3) one 90km BOT road project; 4) coal
mines (for captive purposes) with reserves of about110m tons; 5) one 2,900-acre
Special Economic Zone; and 6) about 220 acres of real estate near Mumbai and
Bengaluru airports.
�� Statement of Risk
In our view the key risks for GVK with regard to airport projects are: a)
execution delays; b) regulatory risks related to revenue; and c) traffic risks. With
regard to power projects, we believe the key risks are: a) shortages in fuel
supply; and b) collection risks. For road projects: a) traffic; and b) collection are
key risks. All of GVK’s projects face interest rate-related risk.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
GVK Power and Infrastructure
MIAL stake increase is a positive
�� GVK acquires additional stake of 13.5% in Mumbai Airport from Bidvest
GVK plans to increase its stake in Mumbai International Airport (MIAL) to 50.1%
(currently 36.6%; Bidvest retains a 13.5% stake). Although subject to regulatory
approvals, the transfer is likely to happen in May 2011. We think this is positive as
GVK already has management control and understands the asset very well. We
also believe that there are limited large-scale opportunities in India in the airport
sector. MIAL is GVK’s largest asset, contributing about 37% of our sum-of-theparts
valuation.
�� Media reports suggest a deal value of about US$230m for 13.5% stake
As per the above (exact transaction value not disclosed), the equity value for MIAL
would be US$1.7bn, about in line with our valuation. Some news reports also
suggest a payment of US$287m, which would likely include funding/transaction
costs for GVK. Near-term EPS would reduce due to interest payments (~20%/10%
in our estimate for FY12/FY13-14, assuming an interest rate of 10%), while
operating profit would increase ~70%/40% due to MIAL consolidation (currently
accounted as an associate, holding sub 50%).
�� Funding through debt for three years; PE funding eventually
GVK is looking to finance the deal through a three-year debt. GVK had taken debt
of Rs6.9bn for the Bangalore Airport stake purchase, which has been rolled-over
by one year at an interest rate of 10%. Total debt for stake purchases in both the
airports is about US$380m. GVK has already stated an intention to raise private
equity money in its airport vertical, which will aid in repaying this debt.
�� Valuation: maintain Buy
GVK is our preferred pick among diversified developers. Our Rs50 price target is
based on our sum-of-the-parts valuation
Valuation: Buy with PT of Rs50
Our price target comprises: 1) Rs19 for power; 2) Rs15 for real estate (airport
related); 3) Rs7 for airports (core); 4) Rs7 for the road; and 5) Rs1 for its cash
and investments (at the parent level).
�� GVK Power and Infrastructure
GVK Power and Infrastructure is a leading and diversified infrastructure
developer. Its asset portfolio (attributable) includes: 1) about 2,000MW of
power capacity (including 1,240MW under construction; an additional
2,300MW is planned); 2) two airports (Mumbai and Bengaluru) with maximum
passenger throughput of about 33m; 3) one 90km BOT road project; 4) coal
mines (for captive purposes) with reserves of about110m tons; 5) one 2,900-acre
Special Economic Zone; and 6) about 220 acres of real estate near Mumbai and
Bengaluru airports.
�� Statement of Risk
In our view the key risks for GVK with regard to airport projects are: a)
execution delays; b) regulatory risks related to revenue; and c) traffic risks. With
regard to power projects, we believe the key risks are: a) shortages in fuel
supply; and b) collection risks. For road projects: a) traffic; and b) collection are
key risks. All of GVK’s projects face interest rate-related risk.
No comments:
Post a Comment