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AAPT fire sale
THE piecemeal break-up of AAPT by Telecom New Zealand kicked off yesterday, with the New Zealanders freeing up $10 million through the sale of a 10 per cent interest in Macquarie Telecom.
With iiNet in a trading halt pending a material acquisition, a sale of the AAPT consumer business looks to be just days away.
At this stage it smells like a fire sale. The handful of institutions and Bell Potter retail clients that put up their hands for the Macquarie stake have secured the telco bargain of the year.
The shares were crossed at $4.80 yesterday morning, putting Macquarie on a multiple of just 1.6 times EBITDA guidance for the June 2010 year. Not bad for a business that's grown 22 per cent this year as the company builds momentum in its higher-margin hosting business.
Why so cheap? While there are plenty of institutional investors that reckon Macquarie is worth as much as $8 a share, which would still only be about four times 2010 EBITDA, the path to unlocking full value may not be easy.
For starters, companies with a large and lazy cash backing tend not to be fully valued by the market, and Macquarie holds more than $2.50 a share in cash, with no debt. If it started paying a dividend instead of hoarding cash, a rapid re-rating would be almost assured.
There's also an issue that the free float is small and trading illiquid as Macquarie is 60 per cent owned by the Tudehope family.
Still, Macquarie management has shown increased interest in improving the company's market profile in recent months, and the sell-down by Telecom New Zealand may encourage a few more investors to take a closer look.