Overview: How does an 18.4 percent per annum after tax compound return sound? Most would be pretty pleased to achieve that on any given year, however early Infratil investors have enjoyed this compounded annual return over the company’s 21 year existence. This makes Infratil the best performer on the NZX over this period.
Pros: This strong performance can only be achieved through astute investing. Infratil seem to have this down to a fine art, having recently sold their Australian energy assets for a pretty penny after making good returns on the partial sell down of Z Energy (Infratil retains a 20 percent holding in Z energy).
The sell downs have allowed Infratil the luxury of paying special dividends to shareholders on top of their usual dividend, the combined total of which was approximately 47 cents per share before tax in the last financial year, or a gross yield of almost 15 percent.
These funds have also been utilised in new ventures, such as their entry into the aged care sector. The Company now owns 19.99 percent of Metlifecare in NZ and 50 percent of Retire Australia. Infratil obviously see good upside in that particular sector.
Cons: Whilst they have used some of the funds raised from recent asset sales, Infratil still has plenty of room on their books for further acquisitions. The problem the company currently faces is that the infrastructure assets they have traditionally coveted are currently being chased by cheap money from overseas.
With many jurisdictions offering near zero interest rates, investors in these countries can borrow very cheaply meaning they need lower returns to break even. This has changed the playing field and means Infratil will have to be very selective when looking at future investments.
Price performance: Infratil’s share price jumped 32 percent last year and is up almost 7 percent this year.
Investment outlook: With a strong suit of assets, that includes a significant holding in Trustpower, 66.7 percent of Wellington Airport, NZ Bus Limited, as well as the assets noted above, Infratil has the looks of a solid portfolio stock.
*A Broker's View is written by Grant Davies, Authorised Financial Advisor at Hamilton Hindin Greene Limited. This article represents general information provided by Hamilton Hindin Greene, who may hold an interest in the security. It does not constitute investment advice. Disclosure documents are available by request and free of charge through www.hhg.co.nz.