Business First - - SHARE MARKET -

Mac­quarie is set to net around $350 mil­lion from the dis­tri­bu­tion of Syd­ney Air­port shares. Fur­ther (and favourably) as the in­vest­ment bank is selling its stake via a dis­tri­bu­tion to share­hold­ers, it avoids pay­ing Cap­i­tal Gains tax on the sale – this gets passed onto Mac­quarie share­hold­ers should they de­cide to sell on the open mar­ket.

Some pro­ceeds from the sale of Syd­ney Air­port are likely to be shared as part of Mac­quarie’s staff bonus pool.

Re­gard­less of all this in­for­ma­tion as a Mac­quarie share­holder is this a good deal? Yes and no. Look­ing at Syd­ney Air­port from a tech­ni­cal per­spec­tive, price ac­tion has been in a long-term up­trend since 2009. Mo­men­tum is strong how­ever price is clos­ing in on the all-time high of $4.46 achieved in 2007. For those not fa­mil­iar with stock charts, an all-time high is a sig­nif­i­cant price level for any stock and it is quite com­mon to see strong re­sis­tance and a sub­se­quent re­ver­sal as price touches this point. Be­ing a tech­ni­cal an­a­lyst I tend to base my in­vest­ment de­ci­sion pri­mar­ily on what price ac­tion or a chart tells me and I back this up with fun­da­men­tal anal­y­sis. In other words I’m look­ing for both price ac­tion and fun­da­men­tal data to tell me whether a com­pany is a good buy. Tech­ni­cally, Syd­ney Air­port looks okay, how­ever it’s a dif­fer­ent story fun­da­men­tally. Whilst there are op­por­tu­ni­ties to ex­pand the cur­rent Syd­ney Air­port busi­ness in­clud­ing grow­ing the car park busi­ness, us­ing sur­plus land for com­mer­cial op­por­tu­ni­ties and cater­ing to ris­ing Asian tourism in the re­gion, as it stands the in­vest­ment it­self is a very ex­pen­sive deal. Syd­ney Air­ports P/E (price over earn­ings) ra­tio is a hefty 40.85 at the time of writ­ing. The sec­tor av­er­age is 16.04. I must ad­mit I tend not to pay too much at­ten­tion to this fig­ure but when cou­pled with a low Earn­ings per Share (a sign of growth) of just 10 cents cur­rently, mov­ing into a fore­casted 12 cents next year and mas­sively high debt lev­els stand­ing at over 300% of eq­uity, these fig­ures paint a pretty daunt­ing pic­ture for share­hold­ers.

As Mac­quarie share­hold­ers, un­til now, have only had gen­eral ex­po­sure to Syd­ney Air­port through hold­ing Mac­quarie shares such fig­ures could have been pushed to one side. The bank was still re­ceiv­ing man­age­ment and con­sult­ing fees and by all ac­counts do­ing quite well in­come-wise from its stake. With the turn­around in Mac­quarie’s main busi­ness any down­side risk to share­hold­ers from Syd­ney Air­port is min­imised. Di­rect ex­po­sure through the pro­posed dis­tri­bu­tion turns this in­vest­ment on its head and I’m sure if the deal does go ahead a num­ber of share­hold­ers will be look­ing at these same num­bers and think­ing their money could be bet­ter placed in a more at­trac­tive in­vest­ment. Such an event could be the cat­a­lyst for a large sell down of the Syd­ney Air­port share price. Im­por­tantly, you also need to won­der that if Mac­quarie has been un­able to sell their stake to a pri­vate in­vestor and through the pro­posed dis­tri­bu­tion are vir­tu­ally wip­ing their hands of this as­set (mak­ing a tidy sum and avoid­ing tax pay­ments whilst do­ing so), do they know some­thing we don’t?

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