Macquarie Infrastructure’s (MIC) Q4 2015 Results Earnings Call Transcript

By | February 24, 2016

Macquarie Infrastructure Corp (NYSE:MIC) reported their Q4 2015 earnings on February 22, 2016, after the market closed. The earnings call was on February 23 and the earnings call transcript was published on Seeking Alpha.

I own shares of MIC in my DGI Portfolio and I was a little concern about MIC, because their stock price has tumbled. I also worried that their dividends may not be sustainable. However, after reading the earnings call transcript, I feel much better holding MIC now. The earnings call was very positive and MIC’s management gave a bright outlook and reassured that the dividends are not at risk. In fact the dividends still have much room to grow. Below are some important excerpts that I would like to share from the earnings call.

 

“There has been enormous volatility in the markets over the past few months. This has contributed to a disappointing decline in MIC’s share price. While equity markets have been volatile and unpredictable, the performance of our businesses has actually been the opposite.”

“We have reaffirmed the free cash flow and dividend growth guidance we initially provided one year ago for 2015 and 2016. So while the world around us is volatile and excited, MIC’s businesses have been boringly predictable, that is just the kind of unsexy business model we want.”

I was wondering why the stock price has fallen so hard, and thought perhaps there may have been something that I had missed. However, the above quote shows that the management is aware of the stock price falling and I am happy to hear that there was nothing fundamentally wrong with the business.

“We are confident in the cash generating capacity of our businesses and anticipate that the growth in dividends in 2016 will be supported by continued growth in free cash flow. At this point, we expect that our payout ratio will remain well within our target range of 75% to 85% of the free cash flow generated by our business.”

The payout ratio is healthy and not setting off any alarms. The management says that they are focused in growing the dividends. Sounds good to me.

“I also think our share price movement has not been tied to anything fundamental or structural. Allocating finite capital in an effort to address a transit reissue seems to me to be the opposite way most of you would expect us to do. I prefer to invest in a strong foundation for the long-term growth of the business and not to deploy capital on the shifting sands of market sentiment.”

Some shareholders voiced out to the company that they should do stock buybacks. While stock buybacks are good, but I would have to agree with the management. If they can make better use of the capital, then they should use it to do what is best for the company. Once the market sees that the company is still growing strong, then the market will eventually correct itself and bring the stock price back up.

“We have an attractive approved list of growth projects that we expect to complete over the course of 2016 and into early 2017 with a current estimated value of more than $200 million.”

Management is stating that they plan to continue growing the company in the next few years. Exciting news.

“Our balance sheet is strong and we have no material exposure to the volatility in credit markets. None of our existing operating company-level debt facilities require refinancing before 2020.”

Management is re-assuring that they will not be affected by a debt crisis. Whew. I can sleep better now.

Overall, the earnings call sounds very positive to me and allows me to continue holding MIC shares. I look forward to their fundamentally strong and growing business and dividends for the long term. Build passive income for life!

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