This is a company with which I have a bit of history, since a colleague at a hedge fund at which I worked was invested in this company in the early-aughts.

The company ran into trouble due to overleverage in an airport parking business that went bust during the financial crisis, but not as much trouble as the market thought it was in. Management had walled off the commitments of each of its businesses from a debt perspective, so that the bankruptcy of one business would not affect the solvency of the overall corporation. This nuance was utterly missed by the market, and the share price was pushed down to the $1 per share range.

Figure 1.

The company is a confusing one to analyze, partly because it is conceptually similar to a REIT – passing through a high proportion of its profits as dividends and tapping the capital markets to expand its capital base. The other difficulty is its management structure; the company pays a management fee to its parent – Macquarie Bank of Australia – and, when its stock price exceeds that of a benchmark, it pays a performance fee to the manager as well.

I fiddled around with a valuation for this firm for a day or more, and finally decided to value the firm as though it were a REIT. I have two models for the firm – one is a discounted cash flow (DCF) model that shows all the investment spending, the other is a dividend discount model (DDM) that shows only OCP and dividends. The DDM is the one I used to derive the low-confidence valuation range mentioned in the report. Please feel free to take a look at both and drop me a line with any questions.

Please also see the fairly detailed notes below.

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