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When it comes to finding companies to research, there are so many that are just no worth looking at. Infratil is not one of them, I like this business, the way they are managed, and the investments they have and continue to make.
This is one I first came across when looking to tender for services for one of the businesses they own. Always good to see who you might end up working with and how to weave a story.
It was interesting to learn the business was the world's first listed infrastructure fund when listed on the NZX in 1994.
My back o’ the envelope intrinsic value calculation is they shares are worth about 15% more than the current price (which has run hard). I like their investments, and their reasonably clean balance sheet.
They recently recapitalised and now have a problem. What to do with a billion dollars? How many companies would like to have that problem? I like they are thinking carefully around the deployment and how they will compliment current holdings. Their most recent acquisitions appear to have been sensible and reasonably well-integrated – this is QScan and Pacific Radiology.
One other thing I appreciate is they are also seem to consider risks carefully. Staying in known markets when expanding geographies, not doubling down on market and geo compounding risk.
Phillippa Harford, the CFO, also just seems to be eminently sensible.
Don’t currently hold, but this one is definitely on the watchlist as a foundation holding.
19 May 2021: Infratil Full Year Results for the year ended 31 March 2021
Infrastructure investment company Infratil Limited (‘Infratil’) (NZX, ASX ticker code IFT) today announced its full year results for the year ended 31 March 2021.
Infratil owns renewable energy, digital infrastructure, airport and social infrastructure businesses in growth sectors. These businesses operate across Australia, New Zealand, the United States and Europe, and include CDC Data Centres, Vodafone New Zealand Trustpower, Tilt Renewables, Wellington Airport, Qscan Group, RetireAustralia and Longroad Energy.
Infratil’s performance for the year ended 31 March 2021 demonstrated the benefits of sector and jurisdictional diversification. Proportionate EBITDAF* from continuing operations of $398.8 million for the year was up from $370.2 million in the comparative period. The impact of Covid on the Infratil portfolio (in particular for Wellington Airport and Vodafone New Zealand) was offset by strong cost control and the continued demand for high-quality data centres facilities, which saw CDC Data Centres earnings growth of 25%.
Infratil’s share of the net loss for the year was $49.2 million, driven by unrealised energy derivative losses at Trustpower and increased management incentive fees, which reflect valuation increases that are not recognised for accounting purposes.
Despite the challenges and restrictions put in place to prevent the spread of Covid, during the year Infratil and its portfolio businesses undertook capital expenditure and investment of $1,235 million, including $250 million in digital infrastructure and technology, $590 million in renewable energy, and $310 million in the initiation of a new diagnostic imaging platform through Qscan Group.
Infratil’s total shareholder return for the year was 91.9%, comprising 4.3% after tax dividend return and 87.6% capital gain, including the rights issue.
Infratil has also declared a final dividend of 11.5 cents per share, a 4.5% increase on the prior year, reflecting confidence in future forecast cash flows.
A remarkable year; global pandemic, first takeover offer in 26 years, and largest ever divestment
Infratil’s businesses have done an exceptional job managing the prolonged impacts of the Covid crisis; servicing our people and customers safely, while safeguarding the capital of shareholders. While Covid demonstrated the benefits of the sector and jurisdictional diversification within Infratil’s portfolio, it has been the incredible work of employees within the portfolio companies that protected retirement village residents, kept the lights on and helped to keep people working and connected.
The indicative offer Infratil received from AustralianSuper was a real time endorsement of the quality of Infratil’s assets and their attractiveness to sophisticated investors. Since the indicative offer, the value of Infratil has continued to be demonstrated through the outcome of the strategic review of Tilt Renewables, the ongoing appreciation of the value of CDC Data Centres and the establishment of a new diagnostic imaging platform.
In rejecting the offer Infratil Chair, Mark Tume noted that “the offer was undervaluing what is both a special group of businesses and a unique and relatively unconstrained operating model.”
The divestment of Tilt Renewables shows the disconnect to private market valuations, with the process also highlighting the accelerating global demand for decarbonisation aligned assets. The shareholder value recognised through the Scheme Implementation Agreement is material, with the NZ$8.10 offer price equivalent to a 106.6% premium above the Tilt share price prior to the announcement of Infratil Limited’s strategic review on 4 December 2020. On completion the transaction is forecast to deliver gross proceeds to Infratil in excess of $2.0 billion.
An opportunity to create a meaningful Australasian healthcare platform
On 22 December 2020, Infratil acquired 56.25% of Australian based Qscan for A$289.6 million (NZ$309.6 million), followed by the announcement after balance date that Infratil has now also entered into an unconditional agreement to acquire between 53.5% and 58.5% of Pacific Radiology, for between NZ$312 million to NZ$344 million.
Diagnostic Imaging is an idea that matters. A value-based shift towards early diagnosis and preventative care can significantly improve the healthcare lifecycle for patients and address system inefficiencies.
Infratil CEO Jason Boyes said the acquisitions “create a meaningful Australasian healthcare platform with a number of potential synergies and adjacent opportunities. The purchases also confirm our continuing confidence in thematics which are driving our capital allocation in communications and digital infrastructure, decarbonisation, and aging populations”.
Following the acquisition of Pacific Radiology and receipt of the Tilt Renewables sale proceeds, Infratil will have net cash of more than $1 billion for investment.
Infratil Considers Infrastructure Bond Offer
Infratil is considering making a new offer of unsecured, unsubordinated fixed rate Infrastructure bonds maturing on 15 December 2027. Full details of the offer are expected to be released in the week beginning 24 May 2021. No money is currently being sought and no Bonds can be applied for until the offer opens.
Outlook and Guidance for the year ended 31 March 2022
Guidance for the year ended 31 March 2022 is for Proportionate EBITDAF of between $470 million and $520 million (excluding Tilt Renewables and Pacific Radiology).
The dividend outlook is for continued growth, reflecting the timing of forecast future cashflows from both CDC Data Centres and Vodafone, as well those from the recent investments in Qscan Group and Pacific Radiology.
Infratil continues to be willing to invest ahead of the mainstream infrastructure market and take on more complex operating businesses to position Infratil’s shareholders in next generation infrastructure. In anticipation of receiving the funds from the sale from Tilt Renewables, management has been particularly active developing reinvestment options, which will prioritise growth from existing businesses where possible.
Notes:
[Disclosure: I hold IFT shares.]
16-Feb-2021: Infratil 2021 Investor Day Presentation
Links to all of the various presentations (Sector Overviews, Portfolio Update and Outlook, Longroad Energy, Galileo Green Energy, Qscan Group, CDC Data Centres, Vodafone New Zealand, and Supplementary Information) can all be found here: https://infratil.com/for-investors/announcements/2021/infratil-2021-investor-day/
All other ASX Announcements by Infratil can be accessed from here: https://infratil.com/for-investors/announcements/
[I hold IFT shares.]
Infratil announces Jason Boyes as its new Chief Executive Officer
The Infratil Board today announced that Jason Boyes will succeed Marko Bogoievski as Infratil Chief Executive Officer (‘CEO’) and a Director effective from 1 April 2021 with Mr Bogoievski stepping down after 12 successful years as Infratil’s CEO and a Director.
Mark Tume, Infratil’s Chair, said that with the strong portfolio positions and a positive investment outlook, the Board view this as a good opportunity to implement the succession plan.
“Marko signaled to the board his interest in this transition some months ago, after 12 years in the role as CEO. The board believes this is the right time for a well-managed transition from one high performing leader to another with the company in healthy shape and with a clear future growth plan.
“Marko has been an outstanding CEO since taking over the reins in 2009, leading Infratil’s investment and portfolio strategy which has delivered a remarkable 18% p.a. over that period. I would like to thank Marko for his leadership and vision in delivering impressive shareholder returns through innovation and foresight.
DISC: I hold (thanks again Bear77)
Here's hoping the good work continues
Update on strategic review of shareholding in Tilt Renewables
On 7 December 2020, Infratil advised that it had initiated a strategic review of its shareholding in Tilt Renewables Limited (Tilt).
Infratil welcomes Tilt’s announcement that it has received a number of non-binding indicative proposals to acquire the company, and that it will provide due diligence access to a number of parties, to enable them to prepare binding proposals.
Marko Bogoievski, Infratil CEO, said “We have received strong interest in Tilt in response to our strategic review announcement in December. This is the logical next step in what is a competitive process, reflecting the strong demand globally for high quality renewable platforms like Tilt.”
No decision has been made in relation to Infratil’s shareholding in Tilt and we will continue to update the market of any material developments. A copy of the Tilt release is attached.
Disc: I have a small holding
Heads up to Bear77! I bought 500 shares (after you put me onto them) I was intending to buy more ,after doing further research, but just after I bought them they went up to more than I was happy to pay for them...so thanks for what I have
09-Dec-2020: Non-binding Indicative Approach for IFT Shares
As expected, the IFT Board have considered the AustralianSuper takeover proposal, and rejected it, as I hoped they would.
From today's announcement:
The Board engaged expert legal (MinterEllisonRuddWatts) and financial advisors (Goldman Sachs) and formed a Committee of Independent Directors in October to assist in its assessment of the proposals. The Board reviewed valuation and the proposed structure and unanimously rejected both proposals as materially undervaluing IFT’s high quality and unique portfolio of assets on a control basis.
The Board also notes material conditions related to Foreign Investment Review Board and Overseas Investment Office approvals in Australia and New Zealand and considers that there are other aspects of the proposal that are unattractive to IFT shareholders, including distributing Trustpower Limited shares without recognising a control premium and avoiding the need to make a takeover offer for that business.
The IFT Board will consider any proposal to maximise shareholder value, but given the significant deficiencies in the Proposal, no further engagement is planned at this time.
The Chairman of IFT, Mark Tume, said: “The Board regularly assesses portfolio construction and return expectations. We have had a long and successful track record as active managers of the Infratil platform, and recent examples include the ongoing success of CDC Data Centres, the proposed acquisition of Qscan and the strategic review of Tilt Renewables. As at 8 December 2020, Infratil had delivered total shareholder returns of 18% per annum since listing in 1994 and has a stated annual targeted return for our shareholders of 11%-15% over the long term”.
IFT Chief Executive, Marko Bogoievski, said: “Both proposals were unsolicited and materially undervalue our significant renewable energy and digital infrastructure platforms. We expect some of the additional value to be demonstrated in the near term with the recently announced strategic review of Tilt Renewables, which will continue, and ongoing appreciation of the value of CDC Data Centres”.
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So far today the IFT share price has not retraced or given up any of yesterday's +21% gain. In fact, it has so far risen another +1% (currently +7cps at $6.87). That's positive. I think this proposal, although rejected by the IFT board, has served to shine a spotlight on IFT, and, let's face it, it probably needed that at some point, as most punters were unaware of the company, or what they do. I'm a happy IFT shareholder.
08-Dec-2020: We'll know more in the morning, however the A$ value of this offer (of NZ$7.43/share) is around A$7.07, and while that's a nice +25.8% premium to the $5.62 level they closed at yesterday, and an even larger premium to their 30-day VWAP up until yesterday, I still consider it to be undervaluing the company. I hope the IFT board also see it that way and reject this offer.
Closer to $8 they might be more interested, but considering the track record of Infratil and H.R.L. Morrison & Co. (which is outstanding) of making LOTS of money out of underappreciated assets in a VERY similar way to what Private Equity groups do (but within a listed company structure) - I would be happier to just see this play out over the next 10 years - as an IFT shareholder - rather than see them get taken out when they're just getting some attention over here on this side of the ditch.
They have such good assets and so much potential. I have posted straws on them here already describing what they own and what they do.
Like Chagsy, this is also one of my favourite companies at the minute and I did view them as a great market opportunity that was only really available to small players like ordinary retail investors or very small funds, because IFT is so illiquid (hardly any sellers on any given day, and often not too many buyers prior to today either).
The exception to that rule of course, is that funds and insto's can get involved - IF they do so via a full takeover offer, as AustralianSuper has done, or if they are very, very patient, and accumulate their position very, very slowly (most of them would not bother). I got set a few weeks ago, as I mentioned in a straw, and I was planning to top up that position, but perhaps not after today's +21% share price jump.
IFT's closing share price today (since the 3:38pm trading pause which was followed by the trading halt after the market has already closed) was A$6.80, which is still below the A$7.07 (NZ$7.43) price that AustralianSuper want to takeover IFT for, but not much below it in percentage terms, and if the IFT board reject the offer, the SP could easily fall back by just as much as they rose today.
Interestingly over on the NZX, Infratil (NZX: IFT) closed just +2.36% up at NZ$6.08, and there was no trading pause or trading halt called for.
I expect the ASX will issue them with a speeding ticket shortly as well, because they were clearly a little late calling for the trading halt today on the ASX, when the share price had already spiked up +21%. They admitted in their request to the ASX for the trading halt that they had, "become aware that the proposal by AustralianSuper Pty Ltd, as trustee of AustralianSuper, to acquire all shares in Infratil for a total implied consideration of NZ$7.43 per share has become publicly known."
No sh!t Sherlock! As IFT were clearly in possession of the offer, perhaps an earlier trading halt request would have been appropriate in the circumstances. That's what I imagine the ASX would be thinking anyway.
It is a little strange that their SP on their home exchange in New Zealand hardly moved today, compared to their +21% SP rise over here.
Mind you, the liquidity of IFT shares on the ASX is so low that it usually wouldn't take many trades to cause a big SP move. That said, the volume was higher than usual today, with 182 trades worth almost $1.5m - being more than double the previous day's trading volume.
The AFR did have a story about this, but it didn't come out until after the market had already closed:
The final few paragraphs are interesting:
AustralianSuper's head of infrastructure Nik Kemp said: "AustralianSuper currently has $NZ1.3 billion invested in New Zealand, reflecting our long-term confidence in this market.
"As a well capitalised and long-term investor, we see significant potential to invest in the growth of Infratil’s assets over the long term on behalf of AustralianSuper’s members, which allows us to provide significant value to Infratil shareholders today.
"We believe our proposal, if implemented, would deliver an attractive premium for Infratil shareholders. AustralianSuper will continue to seek engagement with the board of Infratil to afford Infratil shareholders the opportunity to assess our proposal in full."
AustralianSuper gave no timeframe on when it expected a response from Infratil, and Infratil did not respond to a request for comment.
The offer comes two months after AustralianSuper's closest competitor in funds under management, Aware Super (formerly First State Super), bid to acquire listed telecoms infrastructure company OptiComm for around $675 million.
Opportunities scarce
In the end Aware Super was beaten by telco Uniti [UWL], but the bold bidding war demonstrated the long-standing value mega-funds have placed on infrastructure assets, and the growing appetite to buy listed companies and take them private as non-listed infrastructure asset acquisition opportunities become more and more scarce.
AustralianSuper has around $20 billion invested in infrastructure assets, more than 10 per cent of its total assets under management. They include Ausgrid, WestConnex, Transurban Queensland, NSW Ports and Perth Airport.
Last month the super giant announced it would go net zero by 2050, meaning low-carbon assets such as renewable energy infrastructure will become an increasingly important part of its portfolio.
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I hold IFT shares. I also hold UWL shares - which was mentioned above in the third to last paragraph. I also used to operate my SMSF through AustralianSuper, but I swapped back to CBUS (another industry super fund that is not as big as AustralianSuper, but is big enough and has performed better for longer) a few years ago. Within CBUS, around 90% of my investable funds are in the "CBUS Self-Managed" section, where I nominate exactly which companies, ETFs or managed funds I want each dollar invested in. The other odd 10% is invested 50/50 in their CBUS High Growth and CBUS Growth (CBUS MySuper) strategies. It's a cheaper and easier alternative to setting up your own SMSF by yourself, because CBUS cover all the compliance side of things and the fees are a lot less. The downside is that your options (of what you can invest in) are limited to ASX300 companies only, no LICs, only a small number of ETFs, and only two managed funds, being CBUS Infrastructure and CBUS Property. You can also use their standard investment strategies for a portion of your capital as well, as I have with around 10% of mine, but with those you are outsourcing the funds management to them. They also have rules such as no more than 20% in any single company (higher weightings are allowed for some ETFs or for their own investment strategies) and no more than 80% in direct company shares. I have a large exposure to gold producing companies within my CBUS self-managed fund, however I do also hold gold companies in other portfolios as well. I trade less often in my CBUS super account; it can often go months without me looking at it, whereas I usually monitor two of my other portfolios daily.
Because I previously had a similar arrangement through AustralianSuper, Australia's largest industry super fund, as I currently do with CBUS, I do understand what AustralianSuper are trying to do here. However, as an IFT shareholder, I think the offer is too low, and I wish they'd buzz off and find another company to takeover. I was looking forward to following IFT and increasing my exposure to IFT as my investment thesis for them played out over the coming years. I hope to still get that opportunity.
12-Nov-2020: Interim results for the period ended 30 September 2020
Notable achievements during the period:
Over the decade to 30 September 2020 Infratil has:
--- click on the link at the top for the full report ---
[I hold IFT shares.]