Guys, my review of prospectus numbers came up with circa $35m for total operating costs and $100m for interest repayment. Using RCY charges and vehicle type breakdown I came up with circa 70,000 a day average over the year to give me revenue of $135m. Given the 6 months early start I assume a 2-year ramp up and I also assume a straight line ramp up to 100,00 vehicles a year at the end of year 2.
This means that at the start I have traffic at 60,000 rising to 80,000 at the end of year1 - giving me my 70,000 average over the first year.
Perhaps 60,000 a day at the opening is not too big an ask. If I assume 4 hours peak period with a vehicle entering the tunnel every 2 seconds and for the other 20 hours averaging a vehicle every 10 seconds I can get to 60,000 a day.
The key here is getting the 60,000 a day at the start!!! If this number can be achieved then there is no need for capital raisings - ala ConnectEast. A CR at say 25c a unit you would need a 2 for 1 just to raise $400 mill and drop debt to $1 billion - reducing interest by about $30 mill/year. CRs will be too highly dilutive.
At end of year 2 if we get 100,000 vehicles/day - the surplus available for distribution in 2012 is circa $40mill working out at about 5c a unit. Using Transurban's 4+% yield as a guide I think a yield of 5 to 6 % tax free is possible. This means a share price of 83c to $1.00. After discounting by 1 year, we are looking at 75c to 90c today.
Bearing in mind that RCY has plenty of reserves for the ramp up, it can still cope with a starting point of 50,000 averaging 60,000 for the first year - without having to increase debt/CR. In this scenario, traffic is 50,000 at start and 70,000 at end of first year. Second year traffic is 70,000 going to 90,000 at end of year2 averaging 80,000 for the year.
If in year 3 we have 90,000 vehicles our estimated surplus is $23mill. or 3c distribution a unit. In this scenario we have a SP worth 45c to 55c.
In both scenarios I assume per the prospectus that from 2012 the traffic increase is about 4,000 vehicles per year over 5 years then flattening out. 4,000 vehicles adds about 1c a unit in distribution. With this outlook after year 2 it is possible that RCY SP is $1.00 to $1.50.
Anyway, at start up 60,000 vehicles per day fantastic. 50,000 vehicles we can cope with. If I believe these numbers are achievable - thus share price should be minimum 45c maximum 90c. Of course at end of year 2 we are looking for 90,000 to 100,000 vehicles. 80,000 vehicles shouldnt kill us.
Key is 50,000 to 60,000 vehicles per day at start up - average over the first 2 months!
Guys, your comments most appreciated. Cheers
RCY Price at posting:
28.0¢ Sentiment: Buy Disclosure: Held
