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As GMR's domestic airports face policy uncertainty, its international airports take centre stage:
Turkey breakeven looks ahead of schedule and Male revenue is ramping up. We revisit our
earnings forecasts and incorporate the impact of equity raising at the holding companies. We
lower our TP but maintain Buy.
Airport drivers shift to international assets until domestic regulatory issues resolved
We see GMR Infra’s key drivers in FY12 as: 1) a faster turnaround of SGIA airport (Turkey) than
we and management had forecast, given better-than-expected traffic growth to date; and 2) the
recently acquired Male airport (Maldives). We raise our forecasts for both airports, resulting in
FY12F EBITDA growth of 31% for the airport division. However, given our lower long-term growth
assumptions for its domestic airports, we cut our valuation for the division.
Power assets – poor visibility on near-term fuel availability
Short-term fuel concerns weigh on our FY12 forecasts for the power division. Plant load factors
(PLFs) have been good in recent months but visibility here remains poor. In the medium term,
management hopes to cover the shortfall in its coal requirement from its mines in Orissa and
Indonesia, but near-term fuel availability concerns prompt us to cut our FY12F EBITDA for the
division by 31%. For FY13F, we raise EBITDA 17% on higher PLF assumptions.
Target price falls to Rs51.6/share, as we build in holding company equity dilution
At the consolidated level, our revised EPS forecasts swing into losses in FY12 – weighed down
mainly by the power, real estate and mining operations, although we expect the worst to be over
by end-1H. However, we see the power division bouncing back in FY13, when our EPS forecasts
rise 20%. Longer term, we have moderated our revenue assumptions in the airport and power
divisions, leading to reductions in our divisional valuations. We also take account of the recent
private equity investments in these two divisions via convertible cumulative preference shares.
We expect these investments to result in equity dilution in the respective holding companies; as a
result, our earnings model incorporates no preference dividend outflow. On our current valuation,
we expect dilution of 15.1% in the airports holding company for US$350m and 18.2% in the
power holding company for US$300m. Although our target price falls to Rs51.6/share, it still
implies 62% upside potential and, so, we maintain our Buy rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
As GMR's domestic airports face policy uncertainty, its international airports take centre stage:
Turkey breakeven looks ahead of schedule and Male revenue is ramping up. We revisit our
earnings forecasts and incorporate the impact of equity raising at the holding companies. We
lower our TP but maintain Buy.
Airport drivers shift to international assets until domestic regulatory issues resolved
We see GMR Infra’s key drivers in FY12 as: 1) a faster turnaround of SGIA airport (Turkey) than
we and management had forecast, given better-than-expected traffic growth to date; and 2) the
recently acquired Male airport (Maldives). We raise our forecasts for both airports, resulting in
FY12F EBITDA growth of 31% for the airport division. However, given our lower long-term growth
assumptions for its domestic airports, we cut our valuation for the division.
Power assets – poor visibility on near-term fuel availability
Short-term fuel concerns weigh on our FY12 forecasts for the power division. Plant load factors
(PLFs) have been good in recent months but visibility here remains poor. In the medium term,
management hopes to cover the shortfall in its coal requirement from its mines in Orissa and
Indonesia, but near-term fuel availability concerns prompt us to cut our FY12F EBITDA for the
division by 31%. For FY13F, we raise EBITDA 17% on higher PLF assumptions.
Target price falls to Rs51.6/share, as we build in holding company equity dilution
At the consolidated level, our revised EPS forecasts swing into losses in FY12 – weighed down
mainly by the power, real estate and mining operations, although we expect the worst to be over
by end-1H. However, we see the power division bouncing back in FY13, when our EPS forecasts
rise 20%. Longer term, we have moderated our revenue assumptions in the airport and power
divisions, leading to reductions in our divisional valuations. We also take account of the recent
private equity investments in these two divisions via convertible cumulative preference shares.
We expect these investments to result in equity dilution in the respective holding companies; as a
result, our earnings model incorporates no preference dividend outflow. On our current valuation,
we expect dilution of 15.1% in the airports holding company for US$350m and 18.2% in the
power holding company for US$300m. Although our target price falls to Rs51.6/share, it still
implies 62% upside potential and, so, we maintain our Buy rating.
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