Sharechat Logo

UPDATE: Infratil investors watch $1 billion war chest

Wednesday 18th May 2016

Text too small?

Infratil investors are waiting to see what the listed investment firm will do with the $1 billion war chest it's built up since selling its Z Energy, Lumo and iSite holdings in the 2016 financial year. 

The Wellington-based company is sitting on cash of almost $730 million and unused credit lines of about $270 million which it plans to invest both within its existing units and in new opportunities. Chief executive Marko Bogoievski told a briefing in Wellington that Infratil's focus is on renewable energy, the retirement sector, social infrastructure such as housing, telecommunications infrastructure, and waste management. 

"Some sectors are represented in our portfolio today, and there are some we hope to have in the near future," he said. 

Last year Infratil was trumped in its pitch for Australian renewable firm Pacific Hydro by Chinese state-owned power company SPIC in what Bogoievski said was "quite a large margin." 

He expects that kind of competition to remain as long as low interest rates continue to provide cheap funding and cause some investors to change their tolerance for riskier assets, however, he's still optimistic about Infratil's ability to deploy its capital through both its existing businesses and in new acquisitions. 

That includes upgrades at Wellington International Airport, the potential for investing in the development business of Trustpower if a proposed demerger goes ahead, introducing electric vehicles to its New Zealand Bus fleet, and building out its retirement village units. 

"There's quite a significant amount of internal capex planned for this current year," he said. "We will make quite a large commitments when we get access at the right prices - I think that's reasonably likely in this 2017 fiscal year." 

Infratil today announced its annual underlying earnings rose 2.5 percent to $462.1 million, meeting guidance, and affirmed its forecast for 2017 earnings before interest, tax, depreciation, amortisation and fair value movements of between $475 million and $515 million.

The shares advanced 1.2 percent to $3.35, having gained 1.1 percent so far this year. 

Mark Lister, head of private wealth research at Craigs Investment Partners, said the result was broadly in line with expectations, and investors are waiting to see what Infratil does with its capital. 

"It really is a case of what do they choose to do with their funding capacity - have they got any other investments they're willing to look at and how do they deploy that capital and make use of that balance sheet?" he said. "That's really what it comes down to when you're looking out over the next couple of years." 

In its annual report released today, Infratil said it has refrained from returning capital to shareholders due to market uncertainty creating good investment opportunities and the long lead-in times for the company's internal investments. 

The company's capital position allows for up to $1 billion of new investments, a capital return of $500 million to shareholders, or a combination of the two. 

"Of course as time goes if investments are not made then excess capital will be returned to shareholders," Bogoievski and chairman Mark Tume said in the annual report.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

MARKET CLOSE: Blue-chip stocks Meridian, A2 lead market lower
NZ dollar rises on Brexit hopes, rate cut reassessment
Three not failing, just needs a new owner - MediaWorks CEO
Major investors back new CBL class action targeting directors
Rip Curl purchase a done deal on Kathmandu proxies alone
Comvita chair Neil Craig eyes the exit once he finds a new CEO
Mercury raises guidance on increased storage, high spot prices
Eroad reports strong 3Q sales growth, eyes ASX listing
MediaWorks puts TV business on the block
NZ dollar benefits as preliminary Brexit deal improves risk appetite

IRG See IRG research reports