Infrastructure projects offer highly visible cash flows which are in many cases index-linked and therefore protected from the ravages of inflation. In a world where interest rates are still near record lows and rising only slowly, the hunt for reliable cash flow is still very much on and infrastructure fits the bill. All of the investment trusts in this area do offer meaty dividend yields and the offer price for John Laing comes with a 3.57p-per-share dividend on top.
Consolidation across the sector would make sense, as it is not entirely clear why several management teams are required to run portfolios of these assets when one could surely do the job just as well, taking out costs in the process.
The 20% premium represented by the 142.5p offer price plus the dividend, relative to the trust’s last stated net asset value per share figure of 121.9p, compares to an 11% premium across the overall Infrastructure investment trust sector and the 8% premium across infrastructure investment trusts that specialist in renewable energy projects.
Sector Specialist - Infrastructure | |||
Trust | Share price | Premium/(discount) to NAV | Dividend yield |
John Laing Infrastructure | 146.1p* | 20.0% | 4.8% |
3i Infrastructure | 242.6p | 16.0% | 3.6% |
BBGI | 145.5p | 15.1% | 4.5% |
Sequoia Economic | 112.0p | 11.8% | 5.4% |
International Public Partnerships | 155.8p | 10.1% | 5.4% |
GCP Infrastructure | 122.4p | 10.0% | 6.2% |
HICL Infrastructure | 158.4p | 7.0% | 5.1% |
|
|
|
|
AVERAGE |
| 11.2% | 4.8% |
Source: The Association of Investment Companies. *Based on 142.5p offer price plus 3.57p dividend per share
Sector Specialist – Infrastructure: Renewable Energy | |||
Trust | Share price | Premium/(discount) to NAV | Dividend yield |
Bluefield Solar Income | 120.5p | 10.8% | 6.2% |
Greencoat UK Wind | 124.8p | 9.4% | 5.4% |
Renewables Infrastructure | 110.4p | 9.3% | 5.9% |
John Laing Environment. Assets | 105.0p | 7.1% | 6.2% |
Greencoat Renewables | €1.03 | 6.8% | 5.8% |
Foresight Solar | 111.5p | 5.9% | 5.9% |
NextEnergy Solar | 110.0p | 5.3% | 5.8% |
Gore Street Energy Storage | 99p | 1.0% | n/a |
|
|
|
|
AVERAGE |
| 8.2% | 5.8% |
Source: The Association of Investment Companies
“Concerns over what a Labour Government may mean for public-private partnership (PPP) infrastructure projects, coupled with the financial and political impact of the collapse of Carillion, a major player in the PPP market, have put pressure on infrastructure investment trust valuations.
“Having traded at big premia to net asset value, they briefly dipped back to NAV, or even below it, and in this context the bid for John Laing Infrastructure Fund looks like a shrewd bit of value hunting by the buyers.
“Other trusts in the infrastructure sector have seen their share prices rise in sympathy and most now trade at a premium again. That may lessen their appeal to financial buyers but consolidation between the quoted trusts remains a possibility and the John Laing bid may well help to put a floor under their share prices anyway. Any further declines in sterling could also attract the attentions of overseas buyers, even if their involvement in high-profile PPP deals could be more politically contentious.”