Daily ShareChat: Infratil

Infratil and the New Zealand Superannuation Fund's have acquired a quality asset at an attractive price in paying $696.5 million for Shell's New Zealand downstream assets, says First NZ Capital analyst Rob Bode.

He estimates the price represents a multiple of 4.2 times the earnings before interest, tax, depreciation and amortisation (EBITDA) of the retail and distribution assets, adjusting for the average level of inventory and backing out the value of the 17.1% stake in New Zealand Refining at his firm's valuation of $3.40 a share.

"Given the low acquisition multiple, Shell NZ is anticipated to be immediately accretive to Infratil's earnings. We estimate Infratil's annual earnings should increase by at least $20 million a year," Bode says.

The Shell businesses also have opportunities for both adding value and extracting excess capital, he says. "Over a four-to-five-year period, we see potential for EBITDA to lift from around current levels of $140 million to around $200 million to $220 million. In addition, we see potential for perhaps $200 million to $250 million of surplus capital to be extracted," he says.

"We think this investment could deliver value (capital growth and dividend income) in excess of $500 million for the consortium over the next five years."

BROKER CALL: outperform.

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