Hicl Infrastructure Share Discussion Threads

[uapatel] 26/1/2018 15:55

Good to see Director buys

[le4r] 26/1/2018 15:11

Agreed jonwig re it being a mathematical result, but that's the point - it's a given. And it will help to absorb the Carillion provision, all else being equal. Of course your point that the discount rate used for valuation purposes might fluctuate to account for the additional political / counterpart risk is valid, but I'd say that the risk free hasn't tracked too far north (as yet!) and the risk premium has stood at elevated levels for years now (see p41 of the interim pres), so there's quite a bit of 'tolerance' built in, IMHO. In fact there's still been downwards pressure on the discount rate in recent years - albeit more moderating of late - as institutions have been scrambling to get their allocations following their somewhat slow recognition of infrastructure as a bona fide asset class in its own right, rather than it being bucketed within their real estate holding! I don't think that's going to change overnight.

[jonwig] 26/1/2018 14:44

LE4R - unwinding of the discount rate is a mathematical outcome. What isn't is a change in the discount rate - the part which tracks gilt yields will rise, and the part which tracks market risk will (I guess) rise.

[uapatel] 26/1/2018 14:06

LE4R,

Thanks will look over. Just switched a few shares for more here.

Will addmore next month as I never get my timing right.

[exel] 26/1/2018 13:54

thanks all, I sense the share price gloom has been a tad overdone. also, it would be unusual if the Board hadn't taken the opportunity to round up to the £50m provision level - to give themselves at least some comfort margin while this Carillion issue is resolved.

[le4r] 26/1/2018 13:05

Chucko1 / uapatel - look at the interim presentation, slide 32. Shows movement in NAV/share in H1. There's 4.2p from just the unwinding of the discount rate. In other words - and ignoring all other value uplift delivered from external factors such as changes to assumptions, tap issues at a premium, reduction of DR etc - as we move forward in time, closer to those future cash flows, our NAV has moved up by north of 4p. Expect the same as at 31 March, so the Carillion provision could double as you say and we'd probably stand still on NAV basis vs 30/09/17. Implies a current yield of 5.6% and discount of 6%

[uapatel] 26/1/2018 12:46

chucko1, agree with you and will top up when funds are available. Means averaging down, but then this a long term investment for diversification for me.

Makinbuks, I'm sure there may be more fall out on the PFI issue as the government reviews its procurement options in the future. But let's face it HICL can take on more non UK projects for future investment opportunities.

Good luck all holders

[le4r] 26/1/2018 12:41

Not without its risks of course but, subject to any government windfall tax or contract meddling (which I consider unlikely given the vast sums of private capital needed for future projects), cashflow is very solid and so I suspect now is a pretty good entry point. Divi yield will underpin price at a certain level. I've just topped up twice

[makinbuks] 26/1/2018 12:34

I'm not sure I'd buy at par. Quite apart from the veiled threat that the value of some investments may be impaired if the new contractors cost a lot more than Carillion, there may be a re-assessment of risk in the sector that means trading at a discount in future. There's also the issue of future deal flow. On the one hand margins might improve following this but on the other Government may regard further PPF style deals as politically too risky

[neilyb675] 26/1/2018 11:45

Man up ffs

[chucko1] 26/1/2018 11:43

Even a further £50mm provision (so £110mm in all) implies a NAV of 144p or so. If you have the patience to stick this out, and with a current affirmation of maintained dividends for this year and the next two, it’s no horror story. It’s up to a 5.49% yield at a price of 141p.

[spectoacc] 26/1/2018 10:53

@Jonwig - agreed. First it was "£5-10m, already provisioned for", now it's "£50m hit to NAV etc". Seems there's further for the CLLN implosion to run.

[jonwig] 26/1/2018 10:19

Alternatively, "This just shows that the private sector cannot be trusted to run efficient and reliable public services." Some fairly good news recently: Momentum have decided that a wholesale deselection of Blairite MPs won't go ahead for fear of damaging party unity. This means that even a Labour majority couldn't deliver on the wilder promises - for some time, at least.

As for HICL, NAV at 30 Sept was 152p so I guess after the new provisions it's probably trading around par. However, there's a hint that this might not be the end of the story. The fact that the share price only fell after 9:00 (and same with JLIF) suggests exit by discretionary wealth managers.

[spectoacc] 26/1/2018 09:25

Not quite what we were led to believe initially. Shows the abject folly of the far left in thinking PFI is all bad for govnt/taxpayer (perhaps they confuse PPI with PFI?).

"...The Investment Adviser has developed a preliminary assessment of the financial impact of Carillion's liquidation on the Company. This has been discussed with, and reviewed by, the Board. Based on current information, the impact is estimated at approximately GBP50m of NAV (equivalent to 2.8p of NAV per share, or 1.8% of NAV per share as at 30 September 2017), which is incremental to a provision of GBP9.4m that was taken at the time of the Company's Interim Results in respect of counterparty exposure.
This assessment incorporates assumptions around the expected costs of the transition phase; the anticipated timing and costs of implementing long-term solutions; delays to distributions at project level; and a view on the possible impact on the valuation of these projects as at 31 March 2018. The Company will further update shareholders at the time of the Annual Results, unless the Investment Adviser's assessment of the financial impact changes materially in the interim in light of new information. "

[schofip] 22/1/2018 17:20

Extract from AJ Bell Monthly Shares Magazine on winners and losers from Carillion.

"Some listed infrastructure funds may feel some pain from Carillion’s end. HICL (HICL) has exposure to relevant healthcare assets and has already reduced its portfolio valuation by between £5 and £10m to reflect ‘recent profit warnings from certain counterparties’; which Numis assumes refers to Carillion. (DS)"

[uapatel] 22/1/2018 15:35

Looks like a little bounce back after the over reaction to the downside. Don't know if any news coming?

[winsome] 19/1/2018 17:24

Jonwig, I don't think all this background noise warrants selling. Most things we worry about never happen. I could stomach the div being frozen in worst case scenario. Markets are very frothy at the moment and my holdings in HICL, JLIF and 3IN may well outperform them in the medium term, taking into account the yields. They offer more value and stability than most of the FT350 stocks currently.

[jonwig] 19/1/2018 14:35

winsome - yes, you're right ... though that thought doesn't help the share price!

I do think a more likely prospect (either party in gov't) would be a windfall tax on the reduction of CT from (?) 27% to 20%. I reckon accumulated dividends over the last 7 years could be clawed back by around 13%, and current payouts similarly constrained.

Latest NAV at 30/09 was 151.6p, so some will be using this as a key number, I guess. I don't think it's ever traded at a discount - not in my holding time, anyway.

[spectoacc] 19/1/2018 07:22

At risk of going O/T - what gets me with the Corbynistas is how they don't need to remember the 70s - they can just look at existing countries, solidly supported by the likes of Corbyn. Venezuala? Cuba? Which isn't to say the existing system doesn't need fixing - PFI being one example, and it's better already than it was - but fixing within the framework of the only system that actually works.

[jonwig] 18/1/2018 20:00

Losos - you have hit the main point there: in the UK Labour last made a huge mess in the 1970s. The generation who support Corbyn weren't there to remember it. They want change and they like Corbyn's sweet talk. Another baptism of fire may be needed.

It's the same in the markets - youngish traders and bankers in the late 1990s (the dot-com boom) had no experience of the last big bear market of the 1970s and didn't know what to expect. I started investing in 1971 and will never forget that experience!

[losos] 18/1/2018 19:45

chucko1 -"bit of a sell-a-thon today"

A bit lower and even the very small premium could go. That would persuade me to add.
Getting a bit fed up with all the political interferance in business, is there no one around who remembers the era of the communist East European economies ???

[schofip] 18/1/2018 16:02

It is always a good time to buy whist other people are losing their head

[schofip] 18/1/2018 16:00

Couldn't resist the temptation have added.

[uapatel] 18/1/2018 15:44

Well wasn't going to add till later, but the drop was a bit quick relatively, so decided to add a small amount more.