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I held HDF for a while and thought they were getting nowhere, but like wolverine, liked the distribution. Price was always linked to longer term interest rates and part of the recent performance can be attributed to a realisation that the inflation worries aren't too scarey.

 

Was sorry to sell them but had something else in mind at the time (new residence). HDF should extract some synergies out of holding 2 UK water Cos but I would still like some diversity in portfolio.

 

Its a slow build, ideal as you say for SMSF. they have never disapppointed; an important aspect. Like the Hastings/ Westpac link too

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jazzmoo here is the headline from Aegis

 

 

 

Hastings Diversified Utilities (HDF) - Completes $42.75M placement

HDF has successfully raised $42.75M in a placement of 15M new shares at an issue price of $2.85, a 7% discount from yesterday's close. The proceeds will help fund HDF's purchase of UK water utility South East Water.

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Acquires South East Water

 

HOLD

 

$3.06

Share price target (12 months): $3.24

Event

 

HDF along with its sister fund Utilities Trust of Australia (UTA) has agreed to buy the UK water utility South East Water (SEW) from Macquarie Bank for an implied enterprise value of ÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚£665.4M or about $1,663.5M. As SEW has approximately ÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚£404M in net debt, HDF and UTA paid ÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚£261.6M or about $654M for the company. HDF has indicated that it will contribute $230M towards the acquisition suggesting it will have a 35% economic stake in SEW. HDF and UTA paid approximately 1.3x SEW's Regulatory Capital Value (RCV - this is equivalent to the Australian terminology of RAB or Regulatory Asset Base).

 

Implications

 

The decision to purchase SEW seems to only benefit HDF unit holders because regardless of how the UK Competition Commission rules, it looks like HDF unit holders will win. An outright approval would allow the two water companies to merge and extract some cost synergies thus allowing the possibility for higher distributions. An outright rejection and forced sale of one of the two companies would allow HDF to unload Mid Kent Water and retain SEW. While HDF unit holders should eventually benefit from holding Mid Kent Water, selling it today allows unit holders to effectively swap the 'growth only' asset with a 'growth plus income' one. We would view such a swap positively and believe HDF is on the cusp of being re-rated. Our reticence to upgrade HDF's recommendation is based on our uncertainty that SEW will indeed prove to be materially distribution accretive. With the Australian Government 5 Year Bond Yield currently around 5.7% plus a 2.5% HDF spread, we calculate a new price target of $3.24, which gives a target yield of 8.2%.

 

Investment Opinion

HDF's immediate outlook is for steady cash flow generation derived from its gas transmission assets. The potential addition of a Ballera to Moomba gas pipeline to tap Queensland coal seam methane and the acquisition of South East Water has the potential to materially increase HDF's distribution profile. However, until we have greater certainty on its forward distribution profile, we retain our neutral 12-month view on HDF.

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http://www.brr.com.au/site/images/partners/sharescene-logo.jpg

Recent ShareScene.com Radio Broadcast (26/11/2007 12:15:00):

HDF - CommSec 2007 Emerging Companies Conference - Mr Tom Meinert, COO

 

N.B. ShareScene.com Radio can normally be accessed by the 'RADIO' link, top of every page.

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ShareScene.com Radio delivers investor presentations from ASX listed companies. Keep up to date with the latest corporate dealings of the shares you follow. Hear news direct from the source. Listen to directors and investor relations mangers discuss their company, give investor updates and brief on current results. ShareScene.com Radio keeps you informed about company announcements and events, and provides you daily market wraps and industry discussions.

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