IFT - Infratil

[Placebo]

Interesting move buying the buses/ferries. Quite a significant shift in focus I feel. Up to now has all been about buying infrastructure. Now it will also be a public transport operator. Much bigger risks, much slimmer margins. Stagecoach has been very successful in the UK, but it is a different structure there with competing bus operators. Here it is basically one in each city (with a couple of routes being exceptions).

I disagree with the above article, I don't see that it fits their philosophy at all. Plenty of companies that do, e.g. Aussie toll road operators

What next? MFT? AIR?

[Snow Leopard]

Well they reckon they have bought it and they say they are going to pay NZ$250.5 for the priviledge.
Like Placebo I have my reservations about this I would hope that we get a very full statement answering the Why? pretty promptly. Until then I will try and reserve judgement.

[Snow Leopard]

Infratil's Stagecoach FAQ's

[CJ]

Isn't stagecoach the equivalent of buying an airline rather than the airport?

[Toddy]

Time will tell. But Morrison and Co have experience in running public transport services and know exactly what they are getting themselves into.


For my money its significantly better than investing in Austral Pacific where they do not have limited management input, there is either commercial gas in Cardiff or there isn't.

[CJ]

What was the second trading holt for? Did they just provide more details?? {just read the announcement - that was very quick between conditional and unconditional)

What is Go Bus? Is it the equivalent to Stagecoash in the Waikato?? Will Infratil look to buy out Morrison and Co on this to get even bigger economies of scale??

[CJ]

quote:Originally posted by Toddy

there is either commercial gas in Cardiff or there isn't.

And the price they paid reflects that uncertainty. If there is it will pay of, if there isn't it wont. A gamble yes, But ...

In theory Stagecoach is a mature business. It has been around since (at last my whole life) so how can they improve or are they just buying for cashflow?? Interestingly, they bought it for a P/E of 6.7. If Infratils P/E is greater than this (which it is at 26), does that instantly increase the value of IFT or does it reduce th P/E we should be applying to IFT?? I expect the later.

[trendy]

This is an oddball move. Is there any growth potential in public transport? Sector relies on heavy local government subsidies.....not a good investment if you ask me.

[Toddy]

Their recent investment in the graphics company Isite now makes total sense.
IFT management must have been pretty confident about the Stagecoach deal at the time they purchased the advertising company. The advertising side of the Stagecoach business must be worth big money alone.

IFT valuation.
In the past IFT has been valued by the market on a discounted NAV basis. As IFT becomes more of a cashflow company maybe the analyists will factor in the PE ratio.

Lets see what happens when the market opens tomorrow. Stagecoach unlike other recent investments has a solid cashflow so I think that the market will welcome the news.

Have we seen the last of investment announcements from IFT for the year ot will their be more to come.

[Toddy]

Is this an example of IFT management being pro-active.

From the Stagecoach U.K site.

Disposal of New Zealand operations

21/11/2005

Further to its announcement of 18 November 2005, Stagecoach Group plc (“the Company”) is pleased to announce that it has now agreed unconditional terms for the divestment of all of its New Zealand operations (“Stagecoach NZ”) to Infratil Limited, a company listed on the New Zealand Exchange that is a specialist investor in infrastructure and utility assets. The divestment is expected to complete by 29 November 2005.

Stagecoach NZ operates bus services in the Wellington and Auckland areas of New Zealand, and ferry services in the Auckland area.

The enterprise value agreed for the disposal is NZ$250.5m, to be settled in cash. The cash payable by Infratil will be adjusted to take account of cash retained by Stagecoach NZ. After taking account of this, together with transaction costs and the impact of the Group’s foreign exchange rate hedges, the disposal is expected to result in a reduction in the consolidated net debt of the Company of approximately £95m.

The turnover and operating profit reported in the Company’s consolidated accounts for Stagecoach NZ in the year ended 30 April 2005 were £59.0m and £8.7m respectively, under both UK GAAP and IFRS. The gross assets of Stagecoach NZ as at 30 April 2005 were approximately NZ$308m. The consolidated net gain on disposal is expected to be approximately £20m.

The proceeds of the disposal will initially be used to reduce net debt, and the disposal is not expected to materially impact consolidated earnings per share.

The management team of Stagecoach NZ led by Ross Martin (Executive Chairman) will remain with Stagecoach NZ under its new owner.

Brian Souter, Stagecoach Group plc Chief Executive, commented: “The Group’s New Zealand operations have been tremendously successful under our ownership, delivering excellent financial returns. We received an approach about the possible sale of the business and, after assessing Infratil’s offer and the prospects for the New Zealand operations, we concluded that the disposal was in the best interests of our shareholders. We remain focused on our strategy of maximising shareholder value from the Group’s portfolio of bus and rail businesses through organic growth and we are continuing to explore the potential for complementary acquisitions in the UK and North American bus markets."