GMR INFRASTRUCTURE - Turkey airport stake sale to boost cash flow - Edelweiss

GMR Infra (GMR) has signed a definitive agreement with Malaysian Airports (MAHB) to divest its 40% equity stake in Turkey's Sabiha Gokcen Airport (ISG) for ~EUR225mn (~INR19.1bn). The company's equity investment in ISG was ~Eur71.6mn, indicating an exit P/BV of 3.1x. The deal will result in ~INR10.5bn profit (post tax) for GMR. Further, ~INR13bn of debt related to the project (GMR's share) will go off the company's books. The transaction further reinforces the company's intent of deleveraging its balance sheet via asset monetisation. Our revised SOTPbased target price stands at INR30 (earlier INR26). Maintain 'BUY'.

Stake sale in operational airport

GMR, in consortium with Malaysian Airports (20%) and Turkish conglomerate Limak, had won the mandate to build the ISG in 2007 and operate it for 22 years. The total project cost was ~EUR450mn with a debt/equity of ~3:1. The company had taken over operations of the airport from May 2008. Construction of a new terminal had been completed in a record period of 18 months, 12 months ahead of schedule.

Turkey Airport was turbo charged

Passenger growth at ISG had been robust over the years. The airport, with capacity to handle 25mn passengers, handled 15.3mn passengers in FY13, up 11% over FY12. The airport achieved PAT breakeven in Q2FY14. We had valued GMR's 40% stake in ISG at INR2.74bn (INR0.74/share).

Outlook and valuations: Positive development; maintain 'BUY'

The stake sale is in line with GMR's stated asset light strategy to front-end cash flows by developing assets and monetising them at the opportune moment and value. The resulting cash inflow of ~INR19bn will help the company pare debt and deleverage its balance sheet. The current development, following the stake sale in an under construction power project and a couple of road BOT projects, will further bolster investor confidence in GMR's strategy of improving cash flows via asset monetisation. We revise our target price to INR30/share to factor in the higher-than-expected asset monetisation value. Maintain 'BUY/Sector Outperformer'.

Source : Equity Bulls

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