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[sharechat] AIA--Investment Strategy

From: "G Stolwyk" <>
Date: Thu, 21 Nov 2002 09:05:32 +1300

Investment Strategy.

Current price is $5.48. In a previous post a P/E of 23 or $5.88 was proposed. This, after the sale process has been completed and the market has settled.

What then could occur in a sale process?
1. Briefly, a sale to Institutions/Large investors/Retail investors could occur. In some way this most likely will mean discounts in one form or another with the added risk that shares may flood back into the market.
That process could continue for a while and it would take some time for the market to settle down.

2. I would prefer a sale to a buyer who locks in the AIA shares. The ACC, the seller, would hope to secure a premium and the effect would be to remove uncertainty with the price moving closer to $5.90, in my opinion.

The report folowing this study refers to a Spanish firm having a look at AIA.

This Airport is very profitable-it has been hailed as the most profitable in the world- so the interest could be there.
The report says:

"The Independent understands a full takeover offer (later to be scaled back to 51%) is Ferrovial's preferred option for the Auckland City Council stake".

Whatever way is used, any take-over offer has to be pitched well above $6 in my opinion.
What then is the Investor to do?
As an LT investor, I won't be doing anything but for those who want to add to their holdings or want to invest now, the situation is not clearcut. Obviously if item 2 occurs, then perhaps buying now would secure a capital gain.

If item 1 prevails, then the situation is not clearcut but in the medium term could move to say $5.90 as previously discussed.

There is also another route, where say 50% of the wanted shares are bought now and the remainder later on.

Then one hopes that the ACC will "declare" first and the Investor has time to act.

The ACC meeting on the 5th of Dec. is not far away but a lot can happen in that time: Leaks could move the AIA price.

Disclaimer: Circumstances may change. Any action re buying, holding or selling AIA will be at the reader's own risk.

Spanish investors eye Auckland airport


Spanish construction company Ferrovial Aeropuertos - a 20% equity investor in the Southern Cross consortium that in June paid $A5.6 billion for Sydney Airport - has emerged as the front-runner to buy the Auckland City Council's 25.7% stake in Auckland International Airport Ltd.

Backing Ferrovial to help it fund the council purchase, estimated at $450 million minimum, is its Sydney Airport backer, Macquarie Bank.

Unlike Ferrovial, Macquarie does not have a direct equity stake in Sydney Airport. But a range of Macquarie-managed funds hold 53%, largely through Macquarie Airports (40%) and Macquarie Airport Group (12%). In addition, Macquarie Bank was a sponsor and joint underwriter for the Southern Cross consortium.

The Independent understands a full takeover offer (later to be scaled back to 51%) is Ferrovial's preferred option for the Auckland City Council stake.

It's also understood discussions are underway with Manukau City, which holds 10% of Auckland International Airport Ltd. Macquarie has suggested that Manukau becomes part-owner of a holding company which will then bid for the council stake, say people close to the discussions.

Macquarie Bank's New Zealand chairman, Jim McLay, said yesterday it was his company's "absolute" policy not to confirm or deny any involvement on specific matters where clients may or may not be involved in a transaction.

"But I can tell you that no Macquarie fund, such as Macquarie Airports Group or Macquarie Airports, would be involved in an acquisition of Auckland International Airport Ltd," he said.

Others close to the action say Macquarie's role is to help Ferrovial structure and fund the deal.

Three Ferrovial representatives, accompanied by McLay and two Australian Macquarie executives, arrived by helicopter at Auckland Airport around 5pm last Thursday. They circled the airport, then landed and toured the international terminal on foot before departing.

Auckland International Airport's shares were trading at $5.49 yesterday - a level some punters maintain is "pretty fully priced" although Ferrovial could expect to pay a premium for control.

However, ABN Amro has recently produced research supporting a $6.58 share price, valuing the council's stake at $513 million.

The broker projects a net profit of $76.2 million for the 2003 financial year, compared with $71.5 million in 2002 - a figure 21% higher than the previous year.

First NZ Capital, as agents for the Auckland City Council, yesterday began an international roadshow to market the stake to institutional investors. Bids are due in the first week of December and the council may make a decision at its meeting of 5 December.

Two weeks ago, Macquarie Bank reported a 41% jump in net profit to $A183 million for the six months to 30 September, largely on the back of a 28% increase in fee and commission income, to $A662 million. Included were fees from its infrastructure funds, including the poorly-performing Macquarie Airports, which has lost more than half its market value since listing at $A2 earlier this year. Yesterday it was trading at A87 cents.

Macquarie Airports was also hit with a disastrous rights issue in July, with Macquarie Bank and UBS Warburg, as underwriters, forced to pick up most of the shortfall.

Macquarie Bank CEO Allan Moss has warned the second half profit will be lower than the interim as most performance fees had been booked in the first half, but says overall profits for fiscal 2003 will be higher than the previous year.

Shareholders attending Monday's Auckland International Airport AGM were told possible outcomes included selling the stake to institutional investors, a sale of up to 19.9% of the company (79% of the council's shares) to a strategic investors or an outright bid, triggering the Takeovers Code.

Any sale to foreign interests would also need Overseas Investment Commission approval and is subject to final approval from Auckland City.

As part of a discussion on future airport development, John Goulter, Auckland International Airport's managing director, on Monday gave shareholders further details of a marae the board is planning on airport land. To be modelled on the navy marae at Devonport, the project is expected to be finalised at next month's board meeting.

Goulter, who is to retire next year, told shareholders the airport was probably New Zealand's biggest retail centre, with annual revenue from retail of $240 million. Its closest rival is St Lukes in Auckland, with annual revenue of $220 million.


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