Deutsche Numis Listed Infrastructure Quarterly Webinar

In this webinar, Sam Murphy, Tod Davis and Colette Ord from Deutsche Numis’ Investment Companies team were keen to highlight the opportunities present in the listed infrastructure space, given that many high quality businesses are now trading at wide discounts.

The listed infrastructure sector has, in recent times, surprised investors by the extent to which discounts have widened. These discounts now average:

• 16% for core infrastructure *
• 23% for mid-market infrastructure **
• 26% for renewables
• 46% for batteries

Over the long-term, it is important to note that there tends to be a close relationship between net asset value (NAV) and share price returns in this sector. This is because the cash flows that are generated for paying dividends or reinvesting back into portfolios are typically very visible, highly contracted, and supported by sensible balance sheets.

The portfolios in this space could potentially deliver attractive implied returns by function of the share price discounts and the discount rates that the funds use to value their future cash flows. For the quality of earnings, and over the timeframe for which those earnings are visible, the team believe this represents good value. Colette noted that the investment companies team has seen strong returns delivered historically and they would still expect this to be delivered going forward.

There have been some interesting changes in portfolios, with managers recycling assets into higher returning projects. In addition, growth capex is going into attractive businesses and the investment companies team would expect this to come through in returns in the coming years. Earnings visibility and the total returns potential of the sector is as good as it has ever been.

The investment companies team sees many potential opportunities in the sector for those that can look beyond the backdrop of macro issues that are heavily driving sentiment, and instead look to the fundamentals of these portfolios. Today’s discounts are therefore viewed by the team as being a good opportunity to own some high-quality businesses.

Our next Deutsche Numis investment companies event is the Analyst Best Ideas Conference on 9th July. For more information on this and our other events, please contact the investment companies team at funds@dbnumis.com. Find out more about our investment companies offering here: funds.numis.com

^{* INPP, HICL, BBGI
** 3IN, PINT, CORD}