Forum Archive Index - July 2001

["1amiga" <1amiga@ihug.co.nz>]

RESEARCH ALERT-Forsyth Barr maintains "buy" on NZ's Infratil

WELLINGTON, July 20 (Reuters) - Brokerage house Forsyth Barr has maintained its "buy" recommendation on New Zealand utilities investor Infratil (NZSE: IFT) saying it expects a re-rating as the market realises the upside potential in its airport investments.

"There is significant upside potential in IFT's (Infratil's) airport investments which has led us to increase our assessed Net Asset Valuation from NZ$1.92 to NZ$2.17," Forsyth Barr said in a research report dated July 6.

Infratil's major investments include a 66 percent stake in Wellington International Airport Ltd (WIAL) and a 67 percent holding in Glasgow Prestwick Airport (GPIAL).

The report noted that Infratil traded at a 31 percent discount to Forsyth Barr's net asset valuation, which analyst Rowan Johnston deemed as "unwarranted".

Infratil shares last traded up six cents at a new alltime high of NZ$1.63 on Friday.

SIGNIFICANT UPSIDE TO AIRPORTS

Johnston calculated a combined valuation for the two airports at NZ$148.2 million above book value.

The upside to Wellington Airport, New Zealand's third largest, included the potential entry of new competitors to Air New Zealand AIRVB.NZ on domestic trunk routes and likely increases to airfield charges from July 2002, he said.

"Due to WIAL recent upgrade, capex will be minimal therefore price increases will drop straight to the bottom line and generate substantial cashflows."

Wellington Airport is 34 percent owned by local authority, Wellington City Council.

A recent report by NZ competition regulator the Commerce Commission, which recommended price controls be imposed on Auckland International Airport (NZSE: AIA), found that WIAL had not achieved what it considered to be the appropriate target return from its airfield activities.

Growth in passenger numbers, increasing the passenger yield and growing freight volumes also provided an upside for Glasgow Prestwick Airport, Johnston said.

"The airport currently operates well below capacity and passenger numbers could treble from the current one million per annum without significant capital expenditure," he said.

Infratil chairman Kevin O'Connor told the company's annual meeting this week that it would consider other European airport investments on merit.