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Mundra Port and SEZ Ltd Neutral
MPSE.BO, MSEZ IN
Consolidated picture looks better than previously
thought
Concerns ease post closer look at A$1.83bn Abbot Point (APCT x50)
acquisition. MPSEZ will not be required to incur any further capex at the
50MTPA operating coal terminal or for enhancing rail road capacity, as feared
earlier. Management intends to keep the acquisition 100% debt funded at asset
levels, with no recourse to the parent. At three-month Libor + 305bps (<3.5%),
we think the deal funding appears cheap. In the medium term, O&M at the port
will continue to be handled by diversified mining group Xstrata, mitigating
operational risk. We believe MPSEZ will enjoy early-mover advantage at
Abbot, given scale of fresh concessions on the anvil (~240MMT) at the same
location. Based on management inputs regarding scale-up of volumes and
realizations at APCT x50, we estimate that the acquisition is FCF positive from
the current fiscal year and PAT positive from FY13 onwards (see APCT model
and key assumptions inside the report.)
Consolidated picture- higher growth and profitability over the medium
term. Post APCT consolidation, FY11-15E EBITDA and PAT CAGR improve
to 39% and 35%, respectively (from ~32% level earlier). Our FY12 EPS
estimate is down ~7.7% mainly owing to Rs791mn loss in APCT as utilization
ramps up; FY13 estimate is up ~2%. Consol net-D/E is still comfortable at
2.27x (peak level in FY12). The acquisition is RoE accretive and we estimate
FCF yield of ~4.8% in FY13. (Also see F11 summary annual report takeaways
inside the report.)
We est. 26% YoY PAT growth in Jun-q. MPSEZ will continue reporting
standalone quarterly results through FY12. According to management, the port
handled ~15MMT of cargo in Jun-q (up ~19% YoY). We expect coal and crude
traffic growth to drive volumes in 1Q.
Our revised Mar-12 SOP PT of Rs168 (vs. Rs155 earlier) factors in DCF
value of Rs4.5/share for APCT (~15.5x FY13 EV/EBITDA) vs. negative Rs10
earlier (at 15% premium to global avg. port valuation, 12x) owing to easing of
concerns. Although our PT implies only ~10% upside potential, we view
MPSEZ as an attractive long-term investment. We think MPSEZ stands out
with its strong growth, RoE and cash flow profile, with relative absence of
issues plaguing the infra sector currently (fuel, environment, funding, corporate
governance issues). Traffic volatility at Mundra Port is key upside/downside risk
to our estimates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mundra Port and SEZ Ltd Neutral
MPSE.BO, MSEZ IN
Consolidated picture looks better than previously
thought
Concerns ease post closer look at A$1.83bn Abbot Point (APCT x50)
acquisition. MPSEZ will not be required to incur any further capex at the
50MTPA operating coal terminal or for enhancing rail road capacity, as feared
earlier. Management intends to keep the acquisition 100% debt funded at asset
levels, with no recourse to the parent. At three-month Libor + 305bps (<3.5%),
we think the deal funding appears cheap. In the medium term, O&M at the port
will continue to be handled by diversified mining group Xstrata, mitigating
operational risk. We believe MPSEZ will enjoy early-mover advantage at
Abbot, given scale of fresh concessions on the anvil (~240MMT) at the same
location. Based on management inputs regarding scale-up of volumes and
realizations at APCT x50, we estimate that the acquisition is FCF positive from
the current fiscal year and PAT positive from FY13 onwards (see APCT model
and key assumptions inside the report.)
Consolidated picture- higher growth and profitability over the medium
term. Post APCT consolidation, FY11-15E EBITDA and PAT CAGR improve
to 39% and 35%, respectively (from ~32% level earlier). Our FY12 EPS
estimate is down ~7.7% mainly owing to Rs791mn loss in APCT as utilization
ramps up; FY13 estimate is up ~2%. Consol net-D/E is still comfortable at
2.27x (peak level in FY12). The acquisition is RoE accretive and we estimate
FCF yield of ~4.8% in FY13. (Also see F11 summary annual report takeaways
inside the report.)
We est. 26% YoY PAT growth in Jun-q. MPSEZ will continue reporting
standalone quarterly results through FY12. According to management, the port
handled ~15MMT of cargo in Jun-q (up ~19% YoY). We expect coal and crude
traffic growth to drive volumes in 1Q.
Our revised Mar-12 SOP PT of Rs168 (vs. Rs155 earlier) factors in DCF
value of Rs4.5/share for APCT (~15.5x FY13 EV/EBITDA) vs. negative Rs10
earlier (at 15% premium to global avg. port valuation, 12x) owing to easing of
concerns. Although our PT implies only ~10% upside potential, we view
MPSEZ as an attractive long-term investment. We think MPSEZ stands out
with its strong growth, RoE and cash flow profile, with relative absence of
issues plaguing the infra sector currently (fuel, environment, funding, corporate
governance issues). Traffic volatility at Mundra Port is key upside/downside risk
to our estimates.
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