For investors seeking reliable income, global diversification and inflation protection, specialist listed infrastructure portfolios aims to provide all three.

Infrastructure Insights Video

Valuation of Infrastructure Assets Q1 2022

In our latest Valuations update, Portfolio Manager Nick Langley discusses how the macro environment is impacting the listed infrastructure asset class and highlights the valuations of different regions and sectors.

 

Key takeaways at a universe level include:

  • Valuations remain attractive on a medium to long-term excess return basis.
  • Forward looking EV/EBITDA multiplesand Dividend Yields are beginning to normalise for infrastructure stocks (especially airports and passenger rail) as the traffic and earnings recovery continues
  • Listed infrastructure continues to provide attractive valuations when compared to unlisted infrastructure, but with the added liquidity and a greater opportunity set
  • Challenges are easing with COVID variant strains and vaccine supply improving, but differentiation is still occurring within the infrastructure asset class
  • The essential nature of utility cashflows, however, allow for far more predictability in outcomes

Key takeaways at a portfolio level include:

  • Excess return over cost of capital (over 5 years) points to both Infrastructure and Utilities being attractive. Risk/return beginning to tilt in favour of Utilities over Infrastructure
  • Comments by management of portfolio stocks indicate:
    • Infrastructure –  freight rail encountered supply chain disruptions, coming from a greater pull forward of product demand, lockdowns (especially in Asia) and labour shortages. Traffic on developed toll roads, commuter rail and airports continue to recover
    • Utilities – opposing forces of rising global bond yields and higher energy prices (negative) and the best growth prospects in decades (positive), impacted these essential service assets during the quarter
    • Renewables – valuations in renewables remain compelling, although longer duration assets (and cash flows) remain sensitive to rising yields
    • Dividends – transparency of dividends remains high in utilities and improving in transport infrastructure.

For the complete Valuation Presentation Pack, please contact our Distribution Team.

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