[ET Net News Agency, 21 November 2018] CK Infrastructure Holdings (01038) yesterday
confirmed that it has terminated its bid for APA Group due to the lack of a no objection
notification from Australia's Foreign Investment Review Board (FIRB).
Goldman Sachs said this did not come as a surprise given the Treasurer of Australia had
previously expressed concern over the consequent concentration of ownership by foreign
investors in West Australia's gas pipeline assets and came to a preliminary view two weeks
ago that the proposed acquisition is contrary to the national interest.
The research house believes CKI's stock has not priced in much expectation for the
transaction - CKI's share price has not moved much since the bidding proposal was
announced in June, where investors have generally expressed concern over the valuation of
the proposed transaction (15.3x FY2017 EV/EBITDA) and shared skepticism towards the
company's ability to achieve its 8% ROE target - this assumption would have translated
into 8% earnings accretion potential to Goldman's FY2019 base-case earnings forecast.
Despite the termination of the proposed APA acquisition, Goldman expects CKI to continue
pursuing other M&A opportunities given its net debt to net capital should remain
accommodative at 17% by end of FY2018 versus 26% for CKH group (including consolidated net
debt of the co-owned infra projects.
Goldman maintained its "buy" rating on CKI, with a target price of HK$73. (KL)