Treasure Chest | Jul 01 2013
By Greg Peel
Over the past fortnight, both Macquarie and JP Morgan have upgraded their ratings on Macquarie Atlas Roads Group ((MQA)) to Buy or equivalent ratings, joining UBS with a Buy rating. The upgrades have been prompted by the Aussie fall of over 10% against both the US dollar and the euro. MQA derives all its earnings in euro and 89% of valuation is based in euro, with the balance in US dollars.
Adjusting for the currency move not only increases analyst valuations but also Aussie dollar dividend payment levels.
CIMB does not, however, expect the Aussie’s weakness against the euro to last. The analysts see the European Central Bank stepping in during the second half of 2013 to provide support to the struggling eurozone economy, which would in turn put upward pressure on the AUD-EUR. France is among the struggling members of the eurozone, therefore CIMB believes vehicle movements on the Eiffarie/AAPR toll road may fall short of forecasts, thus implying lower than expected revenues for MQA.
MQA is the most currency-sensitive stock in the transport infrastructure sector, notes CIMB, hence a lower Aussie is providing a valuation tailwind. The stock price has outperformed the ASX 200 by 28% since April, having been a serial underperformer prior. But economic conditions in France are providing a headwind, CIMB warns, and the latest traffic stats see the analysts lower their forecasts. MQA also offers the lowest FY13 yield in the sector, at 3.3% on forward estimates.
JP Morgan noted in its most recent update that the State of Virginia is contemplating the purchase of MQA’s other asset, the Dulles Greenway. Were this to occur it would be a positive. UBS further noted a new tax on French trucks using non-toll roads will be introduced in October, making the APPR a potentially reluctant better option. And Macquarie reiterated that the upcoming APPR refinancing is also a potential catalyst.
But CIMB has today downgraded MQA to Underperform from Neutral, lowering its share price target to $1.72 from $1.78.
CIMB’s target compares to high-marker Macquarie on $2.40. Low-marker Deutsche Bank, on $1.50, has not updated its view since the February result. The FNArena database currently shows a consensus of $1.93, with three Buy and three Sell or equivalent ratings.
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