It is good to see that what we have been advocating on this blog in respect of analyst monitoring of Kiwi Rails financial performance has in fact been started. This is a good start on monitoring the true financial performance of the company and has been done by Stephen Hudson of Macquarie Research. This analysis is now being done for all SOE's so Kiwi Rail is simply being monitored in the same way as all its fellow SOE's are.
In November 2011, Macquarie performed an equity valuation report for COMU (Business unit of Treasury tasked with monitoring State Owned Enterprises) on Kiwi Rail. This provides an interesting analysis and perspective of Kiwi Rails prospects and future forecast out to the year 2031. The models broad assumptions, outputs and sensitivities are provided in the report. It is sobering stuff to read with continuous year on year growth for the next 20 years assumed. Herculean to say the least and life is generally, as most experienced analysts would know, not like that over such a long period of time. Even with the best will in the world, and coupled with the large Turnaround capex investment, year on year CAGR growth at those levels is an enormous ask for Kiwi Rail. Interesting also is that the Macquarie forecast EBITDA is somewhat lower compared to the KiwiRail forecast. But good on them for doing it. They have set a view now and Kiwi Rail will be measured on that. The valuation they have arrived at for Kiwi Rail is negative $343 Million.
I have put both a PDF down load version and website link of the report below. It is up to you,the reader to form your own conclusions as to the merits of these forecasts and the resulting valuations. Now that the first step has been done this analysis and report should be refreshed at least every six months as time passes to measure Kiwi Rails actual performance against its Turnaround Plan just like in a listed company. We are watching with interest.
The research note document can be down loaded in PDF format
Or alternatively the website link is below: