KEY POINTS:
Toll got a good deal on the sale of its railways assets to the New Zealand Government and has been handed a timely escape route from a business that was declining in profitability, Australian market analysts say.
Reports published by the major investment banks yesterday all viewed the $665 million price tag on the railway as a good one.
But they stopped short of suggesting the Government over-paid.
Credit Suisse noted that a report last July valued of the entire Toll NZ business at between $607.8 million and $697.8 million. They ascribed a value of $72 million to the road freight business, which Toll is keeping.
On that basis the Government deal would give Toll NZ a valuation of $737 million, well above expectations.
CitiGroup described price as "better than expected". The price was good but largely in line with consensus valuations of the business, it said.
The sale removed a downside earnings risk for Toll, according to First NZ Capital.
"Given the declining earnings profile we have forecast for the business, as well as further downside risk from track access fees, we view the price paid for the NZ rail and ferry assets as fair reasonable."
UBS estimated that Toll would book a A$195 million ($234 million) profit on the sale and also highlighted the way it allowed Toll to exit a challenging business.
In a report titled "Exiting the pain train" ABN Amro described the deal as "a small positive" for Toll but noted the New Zealand business represented just 8 per cent of its earnings.
Goldman Sachs JBWere also took a positive view of the deal. It estimated the rail business had debt of about $120 million.
That meant the transaction had a total enterprise value of $785 million.
