Macquarie Atlas Roads Limited (ASX: MQA) is a global road-toll investor with a portfolio of six assets: one in France; three in the U.S.; one in the U.K.; and one in Germany. It was created out of the reorganisation of Macquarie Infrastructure Group in 2010, and continues to be externally managed by investment bank Macquarie Group. The firm's main asset is a 20.14% stake in Autoroutes Paris-Rhin-Rhone, or APRR. APRR owns concessions to toll more than 2,000 kilometres of motorways in eastern France, most ending early 2035.
MQA shares rose more than 5% last week. Today we take a look at a number of considerations before you invest in MQA.
Increases in traffic volumes and toll revenue
Macquarie Atlas reported solid traffic volume growth of 2.6% in June-quarter 2015 at the APRR, its main asset. So far in 2015, traffic volume is up 2.2% and toll revenue is up 2.7%. This is relatively good considering the soft French economy. The performance at its smaller asset (the Dulles Greenway in Virginia) is even better, with June quarter traffic volume up 5.0%. So far in 2015, traffic volume is up 4.3% and toll revenue is up 7.4%. After years of poor traffic volume, the Greenway is picking up because of ongoing population growth along the corridor and as competing roads become congested.
Investor distributions to grow
It is forecast that distributions to investors will grow strongly during the next several years as debt is refinanced at cheaper rates.
Toll Road Yields
Toll roads are in high demand from pension funds and other large investors searching for yield. The two best roads could potentially be sold for prices above their valuations.
Revenues (All amounts are in millions)
The table below shows that MQA's revenues have been inconsistent.
| MQA | 2010 | 2011 | 2012 | 2013* | 2014 |
| Revenue | 103 | 92 | 93 | 0 | 2 |
| Net Profit | -142 | -289 | -121 | 1419 | -50 |
Source: MQA Annual Reports
*According to MQA's annual reports, 2013 revenue from continuing operations solely reflects interest income due to the fact that, after deconsolidation of the M6 Toll group, MQA no longer has any consolidated toll roads. Deconsolidation of the M6 Toll group has resulted in significant one-off items in the statutory accounts.
Book Value per share
The table below shows that MQA's book value per share has been inconsistent.
| Book Value Per Share | 2010** | 2011** | 2012** | 2013 | 2014 |
| MQA | -0.5 | 0.18 | -2.08 | 1.67 | 1.36 |
Source:Morningstar
** According to MQA's annual reports, the balance sheet showed negative equity from 2010-2013 due to M6 Toll related balances.
Return on shareholders equity (ROE)
The table below shows that MQA has had poor return on equity.
| Return on Equity | 2010** | 2011** | 2012** | 2013 | 2014 |
| MQA | 0 | 0 | 0 | 5.1 | -6.1 |
Source:Comsec
** According to MQA's annual reports, the balance sheet showed negative equity from 2010-2013 due to M6 Toll related balances.
Cash flow since 2010
From 2010 to 2014, MQA generated $143 million in its 'cash flow from operations'. Its 'cash flow after investing' was $196 million. Therefore MQA has negative $53 million in 'cash flow after investing'. The company then paid dividends of $61 million, had other financing inflows of $106 million, and foreign exchange effects of $9 million. All of which resulted in a funding gap of $16 million.
Capital Structure
At the end of 2014 MQA's capital structure consisted of shareholder equity of $822 million and zero debt. It had $30 million in cash and cash equivalents on its balance sheet. Its debt to equity ratio is less than zero.
Verdict
It's difficult to get a good read on MQA's past performance due mainly to deconsolidation of the M6 Toll Group and related accounting balances. While I think investment in infrastructure stocks can provide a good defensive and low risk investment, I'll be waiting for MQA's full year 2015 results before considering it a buy.
