BBGI Global Infrastructure (BBGI ) has published its dividend target for 2025 and reaffirmed its targets for 2023 and 2024, but its shares continue to trade below asset value, according to half-year results.

The £1bn trust managed by Duncan Ball and Frank Schramm declared an interim dividend of 3.96p per share and reaffirmed a full-year dividend of 7.93p this year.

The results also stated that they expect to hit their targets of 8.4p in 2024 (a 6% increase) and 2% rise to 8.57p in 2025. 

‘Dividend growth has consistently outpaced UK CPI (consumer price index) growth since we launched in late 2011, cumulatively growing 44.2% versus inflation’s 40.3%, which compares well with our peers,’ Ball (pictured below) told Citywire.

‘Compared to fixed income, you are getting a dividend that has an inflation linked aspect at an attractive 5.5% yield, which is the key differentiator.’  

The trust also paid out a scrip dividend in March, which Schramm said would be the last, as shares issued at the current 6% discount to net asset value (NAV) would dilute existing shareholders.

With dividends reinvested, investors saw total underlying returns of 1.1% over the period.

However, over the half-year to the end of June, the global portfolio’s NAV per share fell 1.4% to 147.8p, as a result of rising discount rates and negative foreign exchange movements. 

Yesterday, the shares rose 5.2% ahead of the half-year results, narrowing the discount to the June NAV from almost 10% to 6%. Today the shares were flat at 140.5p.

 The managers lifted the discount rate by 0.3% to 7.2% in line with the 20-year UK government bond yield, which rose 0.5%, as a third of the portfolio is based there.

With the exception of Norway and the UK, the portfolio’s other jurisdictions, Australia, Canada, Germany, the Netherlands and the US all saw long-term government bond yields decline over the period.

Negative foreign exchange movements knocked £12.9m, or 1.2%, off NAV.

‘The board does not believe the current share price adequately reflects the value of the portfolio and its high-quality inflation linkage,’ said non-executive chair Sarah Whitney. 

The portfolio’s positive correlation with inflation was a key contributor to performance, with inflation linkage increased to 0.6 times, up from 0.5 times the previous year.

The results also illustrated the portfolio’s long-term stable cash flows up until 2039, driven by an average portfolio life of 19.8 years, which would sustain an annual 2% dividend growth for the next 15 years.

The front-end nature of the portfolio means the full-year dividend cover is expected to fall to between 1.3 or 1.4 times. Any excess cash will be used to pay off the £25.8m drawn under its £230m revolving credit facility, which the managers expect to have done by the end of the year.

If opportunities arise, the managers will consider further investments. 

The board is yet to spend any cash on buybacks, despite the shares currently trading 6% under par, which Investec analyst Alan Brierley said he would like to see.

Transport assets, such as bridges and roads, remain the bulk of the portfolio at 53% of assets, while health infrastructure, such as hospitals, makes up 21%. The largest individual position is the Ohio River Bridges, which constitute 10% of assets.

The Highway 104 project in Canada is the only asset that is under construction and should come online this quarter.

Liberum analyst Joe Pepper said the 11.2% decline in the shares year-to-date implied a risk premium of 4.1% to BBGI’s portfolio, which he believed was attractive relative to peers, but noted that infrastructure funds with better scope for earnings growth that can drive NAV were more attractive, such as 3i Infrastructure (3IN ) and Pantheon Infrastructure (PINT ).

Numis analyst Colette Ord said that despite the robust results, there were better discounts and yields on offer elsewhere, with shares in peers, HICL infrastructure (HICL ) and International Public Partnerships (INPP ), currently trading 17% below par.  

Investec’s Brierley maintained his ‘hold’ recommendation given the trust’s strong operational and financial performance and conservative balance sheet. 

Performance since launch 

Source: Morningstar