Part of Michael Wests article in The Age is about MAP:
Macquarie gets more altitude
FAR from its registered office at 35 Crow Lane East Broadway Paget, Hamilton, Bermuda, Macquarie Airports had its AGM in Sydney yesterday. The usual bewilderment was professed from the executive as to why MAp was so cheap - in light of its net asset backing of $5 a unit. The stock closed at $3.15.
We can help. One: agency costs. The market has twigged that every cent in available capital that is not nailed down will either be swapped for debt, or snipped by Macquarie Group and associates.
We couldn't make it to the meeting, thanks to a coincidental visit to MAp's jewel in crown, Sydney Airport, where we managed to avoid a departure drop-off fine and only got hit for a $4 luggage trolley. But shareholder activist Stephen Mayne gave chairman Max Moore-Wilton a good workout on governance issues, according to his Mayne Report.
Mayne had picked up a ripper that had escaped everybody's attention - a cool $147.4 million fee ripped out of MAp parent MAG after the sale of Birmingham Airport (almost 30% of the Birmingham sale price).
Two: thanks to the spaghetti mud-map of entities - such as MAp, MAG, MAL, MAT1, MAT2, MCFEL and MAML (there's a few to start with) - nobody understands the company except the people who crafted it. Retail shareholders own it on blind faith that airports are solid cash-churning monopolies and MAp knocks out its 7% yield (partly from capital). Yet institutions are underweight, as a fund manager would be hard pressed explaining how the structure actually worked.
Three: the management agreements are secret. The ASX has them but opts not to publish them. Wonder why? The 35% discount to net tangible assets would be tackled if a predator bobbed along, took a stake, called a meeting and sought to have Macquarie ousted as manager. Sadly for unitholders, this won't happen, thanks to the agreement being protected information.
Four: high leverage, related-party transactions and complex externally managed fund models are not in vogue now.
Five: although MAp and Macquarie in general have proven the worth of their valuations (to date), the MAp valuation plays a key part in the model, in that assets are revalued up every six months or year, and refinanced so another fee can be extracted.
Macquarie has done a brilliant job driving growth at Sydney Airport and keeping costs tight. Moore-Wilton said yesterday the thing could fetch more than $11 billion. Macquarie paid $5.6 billion and has probably taken out what it was owed - about $1.5 billion, in fees in five years. Spectacular stuff. The parent might have been shellacked 16% in three days but these are the reasons the parent has performed.
MAP Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held
