HICL Infrastructure (HICL) has looked to move beyond the embarrassment of its aborted merger attempt with Renewables Infrastructure Group (TRIG) late last year by selling its 24% stake in the A63 Motorway in France for £311m.
The price for HICL’s second largest holding at 8.4% of assets represents a 21% premium to book value, which chair Mike Bane said demonstrated the quality of its portfolio.
Significantly, the £2.2bn infrastructure fund run by InfraRed Capital’s Edward Hunt indicated it would reinvest most of the money rather than buy back its shares on a 27% discount, saying it would get a better return.
“We have completed over £1bn of disposals since 1 April 2023 at a weighted average premium of 11%; this underscores HICL’s active approach to asset rotation to create long-term shareholder value,” said Bane.
He added: “Looking forward, the board sees significant opportunity to invest the proceeds into currently available investment opportunities, where these enhance HICL’s strategic priorities and the expected returns exceed the hurdle set by share buybacks.”
HICL shares jumped 3.7%, or 4.2p, to 118.6p.
Our view
Matthew Read, senior analyst at QuotedData, said: “HICL’s disposal of its A63 stake looks like another good outcome for shareholders, but it also underlines the disconnect between the value being realised from the portfolio and the mid-20s discount at which the shares continue to trade.
“The A63 has been a long-term investment for HICL. InfraRed developed the asset from greenfield, through construction and operational ramp-up, creating value at each stage, and has now exited at a 21% premium to the latest valuation. Importantly, this is not a one-off. HICL has completed more than £1bn of disposals over the past three years at an average premium of 11%, suggesting its carrying values remain conservative.
“While investors may still point to macroeconomic uncertainty, higher interest rates and weak sentiment towards infrastructure as an asset class, transactions like this continue to validate HICL’s NAV. They also show that private market buyers, with the ability to take a longer-term view, are willing to pay more for scarce, high-quality infrastructure assets such as toll roads. If HICL can continue to show that its valuations convert into cash at meaningful premiums, the current 26–27% discount does not make sense in our view.”
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