Daily ShareChat: Infratil

By Jenny Ruth

Monday 11th October 2010

Infratil's Greenstone Energy has made an encouraging start since it bought its 50% share in April, says First NZ Capital analyst Rob Bode.

Infratil and the Guardians of New Zealand Superannuation bought Greenstone, which owns petrol stations, 17.1% of the New Zealand Refining Company and 25% of Fly Buys, from Shell.

Bode has revised his assumptions for refining and retail margins which has boosted his estimate of Greenstone's contribution to earnings by about 20%.

Bode says the $210 million purchase price was "a very attractive price, being highly positive to cashflow, immediately earnings accretive and with significant potential for value to be added."

Initially, he had valued the Greenstone stake at $278 million but now values it at $312 million.

While this increase "may seem aggressive in such a short period, we note that on our revised estimates the purchase price represented (an enterprise value to 2011 operating earnings) multiple of just 4.1 times. We think Infratil picked up a bargain."

Bode says Infratil Energy Australia "probably offers the most potential within Infratil's portfolio for capital growth but delivery has not matched potential" and the business is not without its challenges. Any meaningful re-rating of Infratil shares "will probably hinge on convincing investors that value exists and growth is sustainable."
He values the shares at $2.39 and says they are trading at an excessive discount.

Recommendation: Outperform.

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