Macair Worth 7c, Says Deutsche

Sydney Morning Herald

Tuesday July 23, 2002

Brian Robins

As units in Macquarie Airports pulled out of their nosedive buoyed by prospects of a third entrant to the domestic airline industry one key analyst has valued its units at just 7c each.

The controversial Deutsche Bank valuation comes as Macquarie Airports is seeking to finalise a $670 million fund-raising to finance the acquisition of a 28 per cent stake in Aeroporti di Roma and as unit-holders are faced with having to pay an additional $1 a share for their units on October 1.

Deutsche Bank yesterday argued that if the units were valued using a multiple of 11 times EBITDA (earnings before interest, tax, depreciation and amortisation), then Macquarie Airports units were worth only 7c each.

The analysis was based on the fact that airports are mature assets, unable by their nature to enjoy growth spurts by, for example, doubling capacity.

The debate over the value of units in Macquarie Airports comes as Macquarie Bank shares have been dumped in recent weeks on concerns that the group's fund management growth strategy is unravelling.

News that Sydney Airports has held discussions with Singapore Airlines on its possible entry into the domestic market helped buoy the price of Macquarie Airports units, which closed down 3c at 42c, clear of the low of 40.5c.

The Asian carrier is finalising a feasibility study on entering the local market; its initial focus would be on the eastern seaboard, with a service linking Sydney, Brisbane and Melbourne and, possibly, Canberra.

The move by Singapore Airlines comes as both Virgin Blue and Qantas are keen to gain access to space in the Ansett terminal to handle their expanding operations.

``It's like having a two-bedroom house and four children," SACL managing director Mr Tony Stuart said yesterday of the pressure from existing and potential users of space in the Ansett terminal.

Sydney Airports is considering whether the best alternative is to provide long-term leases to existing players or to establish a common user facility out of the former Ansett terminal, similar to the way operations are conducted at the international terminal at the airport.

Sydney Airports is seeking to delay until September a decision on how best to use the Ansett terminal.

``A couple of months is not unreasonable, given the scale of the operations," Mr Stuart said.

``There are a lot of old insides and a very new outside."

The Macquarie Airports units were issued in March at $1 but have been sold off steadily amid concerns that the Macquarie-led consortium, which includes Macquarie Airports, overpaid for Sydney Airports, which it is acquiring for $5.6 billion.

Following the acquisition of Aeroporti di Roma earlier this month, Macquarie Airports is making a 3-for-4 rights issue at $1.50 a share. This comes ahead of the payment by the start of October of a $1 call on existing units.

The big call for money had unnerved retail investors, brokers said.