By Val Cipriani, Investors Chronicle, April 4, 2023:
Social and economic infrastructure trusts continue to trade below their net asset value (NAV) despite an encouraging set of financial results, as worries over interest rates and valuations spooked investors.
In the month to 31 March, share prices in the Association of Investment Companies’ infrastructure group dropped by 7.4 per cent, against 2.8 per cent for the FTSE All Share index. This could be an easy buying opportunity – James Carthew, head of investment company research at QuotedData, said that current discounts to NAV seem like an overreaction. While prices look roughly fair for the few trusts trading close to their NAVs, those on double-digit discounts are “probably too cheap”, he argued. Overall, infrastructure investment companies are trading at an average discount of 10 per cent – Liberum analysts said this was an “oversimplified and unjustified” sell-off, given the resilience of the sector, even with debt costs rising.
Two of the three trusts in the social or core infrastructure sector, which invest in a mix of infrastructure assets and private-public partnerships (PPP), reported solid annual results last week. International Public Partnerships (INPP) delivered a NAV total return of 12.5 per cent in the year to December 2022, and was trading at a 10.3 per cent discount to NAV as at 31 March.
BBGI Global Infrastructure (BBGI)’s NAV total return for the year was 9.1 per cent. The trust is the only one in the infrastructure space trading at a premium, with the exception of Thomas Lloyd Energy Impact (TLEI), a small renewables trust investing in Asia. BBGI has long been a popular play among investors, partly because of its geographical diversification. At 3.1 per cent, its premium is still a far cry from the 25 to 30 per cent it reached in 2021 and early 2022. But Carthew said investors should not expect those premium levels to make a comeback any time soon.
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