Don't go down sales track, analysts advise Asciano
The Age
Friday June 5, 2009
ANALYSTS have urged Asciano to consider a capital raising to help pay off debt just as expressions of interest to buy all or part of the ports and rail group are due to be lodged today.JPMorgan analyst Matt Crowe told BusinessDay there had been a lot of successful capital raisings in the market recently."Up until now, Asciano has focused more on asset sales. The case for an equity raising, instead of an asset sale or part of a restructuring program, must be getting pretty compelling. There has been a great appetite for them," he said.It was a bad time for asset sales, Mr Crowe said. "If they raised $1.5 billion in equity, that would be a much more manageable equity/debt profile. The problem with selling an asset is you lose the earnings that asset produces, whereas you don't get that if you sell equity."Debt-ridden Asciano, whose key assets are one of the nation's two stevedores and rail giant Pacific National, is facing the endgame after months of what it has called a "monetisation process" - taking expressions of interest from various parties that want to buy all or part of the company. The deadline is today.Key bidders are believed to be consortiums led by TPG and Carlyle Group/Kaplan Funds Management, while private equity group Warburg Pincus, Global Infrastructure Partners and possibly the Future Fund are in the picture.Asciano still expects to make a decision on its future by the end of this month.The company, spun out of Toll Holdings two years ago after the $6 billion acquisition of Patrick Stevedores, has $4.8 billion in debt. Deutsche Bank says its gearing - net debt-to-equity ratio - is 233 per cent and its interest cover 0.9.Asciano, which carried much of the debt from the Patrick takeover, has been savaged by the global financial crisis as banks have begun to call in loans and earnings have been hit by the slump in economic activity.Deutsche Bank assessed the ports' enterprise value at $3.2 billion, using a multiple of 10 times earnings before interest, tax, depreciation and amortisation (EBITDA), based on Babcock & Brown's sale of Euroports. After taking into account the ports' share of Asciano's debt - $1.7 billion - this leaves their equity value at $1.5 billion. A sale of half the ports business - $750 million - less the debt transfer would leave Asciano with residual debt of $2.4 billion. A similar analysis of the rail business leaves Asciano residual debt of $1.9 billion.Mr Crowe said it would be unwise to sell the ports. "The ports business is the reason people invest in Asciano. It has the most potential re-rating upside," he said. "When economic conditions improve, the ports multiples increase significantly. You'd be crazy to sell that at the bottom of the market."Asciano's shares closed 4 lower at $1.50, above the February low of 44.5 but well below the $11.43 high reached shortly after it listed two years ago.
© 2009 The Age
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