Macquarie Infrastructure: Q2 Earnings Review - Dividend Return Is Highly Questionable

Seeking AlphaLong Ideas | Services Macquarie Infrastructure: Q2 Earnings Review - Dividend Return Is Highly QuestionableAug. 6, 2020 7:10 PM ET|| About: Macquarie Infrastructure Corporation (MIC), Includes: DAL, JCIby: Zach BristowZach Bristow Medium-term horizon, healthcare, Deep Value, contrarianSummaryMisses EPS by $0.05 and Revenue by 14% on the back of net loss of -$8 million exiting Q2.
19% risk to the downside on single-year price returns to date with now negative sortino ratio means shareholders aren't being rewarded for the extra risk.
Well capitalized through FCF and revolving credit facilities of $600 million and favorable interest coverage, with current debt 4.8x EBITDA.
The company has enough cushion, but lacks visibility on key arms of the portfolio which have suffered due to COVID-19 related contractions in consumption.
Macquarie Infrastructure Corporation (MIC) have recently posted results from the Q2 exit and have missed estimates of EPS by $0.05 and revenue expectations by 14.2%. Earlier this year, the company slashed dividend payments to shareholders in order to preserve liquidity and prevent value erosion on the back of the economic fallout from COVID-19 around the globe. Most recently, their existing Atlantic Aviation (AA) and Hawaii Gas (HG) markets have shown a slowdown in cash generation on the back of significant reductions in air passenger traffic, stay at home orders and overall contraction in tourism supply for Hawaii specifically, resulting in a contraction of demand for Hawaii Gas resources by the end-users. Whilst air passenger traffic has shown glimpses of a rebound during the exit of Q2, the restrictions on tourism continues to limit gas sales in Hawaii whilst reducing demand for AA's ground staff moving out of this period.
Such impacts were partially offset by favorable results from the company's International-Matex Tank Terminal (IMTT) arm, as the reduction in demand of petroleum products alongside the reduction in... Read more