A look At The Special Purpose Funding Vehicle, MG Unit Trust

The Southbank, Australia-based MG Unit Trust (ASX: MGC), established in 2015, is a special purpose funding vehicle that offers its unitholders with economic exposure to the business of Murray Goulburn Co-operative Co. Limited, which wholly owns MG Responsible Entity Limited, the trustee of the MG Unit Trust.

Currently, MG Unit Trust has a market valuation of around AUD 68.33 million with approximately 216.91 million outstanding shares to date. With the end of the market trading session on April 5^th, 2019, the MGC stock closed at a selling price of AUD 0.312, appreciating by 2.295%, trading close to the 52-week high of AUD 0.345 recorded on July 6^th, 2018.

Investors may take note and keep track as the stock performance has improved since the end of January 2019 marking an uptrend. Besides, MGC has also generated a positive year-to-date return of 14.55% so far.

Recently, on April 1^st, 2019, Murray Goulburn Co-operative Co. Limited announced to the market that it had successfully placed its insurance program, effective from end of March 2019. Besides, if MG Unit Trust were to continue to be listed on the ASX, the cost of insurance would not be extremely high, as per the announcement.

MGC had been negotiating its annual insurance premiums for a while according to the information provided in the previous announcements. Also, according to the enquiries of the insurance market which began back in October 2018, Murray Goulburn and the Responsible Entity anticipated that they could reduce the Group’s operating costs, including the cost of future insurance premiums, by delisting the Unit Trust from the ASX. Subsequently on December 17^th, 2018, the Board of the company also declared its proposal to convene a meeting of the unitholders to seek approval for the proposed delisting of the MG Unit Trust but postponed it as the enquiries were ongoing.

According to the FY19 Half Year Financial Report for the period ended December 31^st, 2018, the Group reported the net loss after income tax of $ 17.6 million, reflecting a decline as compared to $ 27.5 million loss in the previous corresponding period (PCP) ended December 31^st, 2017 which is a good indication of its state of affairs. Further, as per the figures posted, the net asset valuation amounted to approximately $ 271.27 million inclusive of net cash and cash equivalents of $ 195.48 million.

Through the six months, the Group generated net cash outflows of $ 2.02 million from operating activities including large payments worth of $ 5.56 million to the suppliers and employees. The investing activities further supplemented the net cash outflows with around $ 24.57 million. These included payment of deposits to the value of $ 14. 86 million plus $ 9.7-million worth of payments to Saputo thus finalising the sale of operating assets and liabilities

In hindsight, on May 1^st, 2018, Murray Goulburn announced the sale of its operating liabilities and assets to Saputo Dairy. Under the deal, the Group agreed to hold liabilities associated with the ACCC proceeding and Webster unitholder class action along with any related claim or dispute. The proceeds from the transaction have been essentially used for the repayment of Group’s debt obligations, return capital to Shareholders/Unitholders and also as working capital fund along with funding of any potential obligations arising from the Retained Litigation.

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