John Laing Infrastructure Share Discussion Threads

[spectoacc] 01/8/2018 07:16

Too low?! Hilarious. So why weren't those same shareholders buying JLIF in size up until a week ago, when it was 20% cheaper?

[riverman77] 16/7/2018 13:53

I'm leaning towards INPP for the moment as this seems to have the most similar characteristics (long-term, index linked cashflows with minimal development risk) and could see a pick up in demand over the next few months as discretionary wealth/multi asset funds look to find an alternative to JLIF.

[topvest] 16/7/2018 11:34

Yes, interesting news indeed. JLG can always sell its projects to others. They will obviously pull in some cash for their investment. It would impact their asset management business though as fees of about £12m at risk. Of course, they will have done well for shareholders so will help them focus more on JLEN.

[jonwig] 16/7/2018 08:59

riverman - yes, I've two concerns about JLG. One is the asset management and what will happen to that contract. Second is the fact that JLG has had a ready buyer for some of its completed projects. However, JLIF hasn't been in a position to buy things for a while.

[riverman77] 16/7/2018 08:51

Nice surprise this morning although trying to figure our what to replace it with. Top 2 candidates are INPP - up around 5% and now on slight premium - or the parent company JLG which is trading around nav. Obviously the latter has more development risk and unclear how JLIF's sale will affect JLG's business model as the asset manager of JLIF

[spectoacc] 16/7/2018 08:49

If the bid goes through, you'd think at least some of the cash that comes in to current JLIF shareholders will flow to the remaining few listed infrastructure ITs. But I'm wondering if some of the simmilar RPI-linked punts might attract some interest - eg GRIO (on its knees atm, for similar reasons), maybe some of the long lease property co's. Main thing for me is - this mooted bid should end the discounts the likes of HICL have been on.

[skinny] 16/7/2018 08:25

I've held these for 7 years and also hold JLG and HICL - so a nice start to the week, but where to put the money?

[spectoacc] 16/7/2018 08:19

We obviously think there's long-term value or we wouldn't be in it, but had it as a long term steady punt. Could finally revitalise the sector.

[mister md] 16/7/2018 08:18

Nice news on a Monday morning

[spectoacc] 16/7/2018 08:16

Yes it's a fair bit over NAV. Giving the other infrastructure plays a boost too.

[jonwig] 16/7/2018 08:14

Here is the announcement;



So where's the hidden value? They obviously think historic navs have been understating the true state of things!

[spectoacc] 16/7/2018 08:09

Wow! "Minded to accept" possible 142.5p offer. Rare I'm lucky enough to be holding a bid stock.

[jonwig] 19/5/2018 12:07

@ Spec - I sold HICL but hold JLIF. With hindsight, should have been the other way round!

What all this ignores is the fact that the portfolio renews via sales and purchases. It also ignores residual values on some assets.

Incidentally the latest results indicate a discount rate of 7.74% which would make a difference. Of course, the rate used by JLIF on its assets needn't be the same as the one an investor might use on the share price - personally mine would have been a lot lower until the political hand grenade.

[spectoacc] 19/5/2018 11:44

So did you sell higher @Jonwig? ;) Great analysis, thanks - interesting point about HICL's better RPI protection (though they've had a lot more Carillion probs than JLIF it seems).

[jonwig] 19/5/2018 09:02

@ SteMiS - looking again at the original prospectus (Oct 2010), there's a chart on p45 which shows distributions from the original seed portfolio. These show that sub-debt within each project is serviced, and there are also bullet payments of sub-debt principal along the way. There are also some complicating factors:

• inflation indexing isn't complete - one reason why HICL is higher-rated is that it has better protection here.

• some projects are demand-based causing income fluctuations. (M6 toll road has had a difficult history - though nothing to do with JLIF. M40 in JLIF is more stable.)

• some projects have run into trouble - Roseberry Park Hospital in the past year, for example, where there was extra expense which didn't work and effective write-off.

• there is residual equity in some projects, such as the M40 motorway where the remit was to design and build, not just operate.

So, unless I've misunderstood your argument, I think your 'homogeneous' view of the portfolio has too many bumps along the way. Without these bumps, your model does suggest money is left for the investor.

The way I thought about it is to ask a typical question, "What would you pay for an asset which gave you £50,000 pa indexed for 25 years?" Assuming 3% inflation and a 7% discount rate, I get about £800,000.

Or, for a potential investor in JLIF, what would I pay to receive 7p pa for * years with *% inflation and a *% discount rate? With the figures above, it's around the current share price!

[Bit of a rush, hope calcs are right.]

[stemis] 18/5/2018 16:14

No, I'm assuming that the valuation of each PFI project is the discounted cashflow of the payments from it to JLIF. As the payments come in to JLIF they reduce it's investment in the PFI which on the other hand grows by the unwinding of the discount. By the end of the PFI, the investment is zero but the company has received a load of cash (the net present value of which is the current valuation of the PFI). Isn't that how it works?

[jonwig] 18/5/2018 12:16

@ SteMiS - I'm banished to the garden today, will get back to you. But it reads as though you're assuming a residual value at the end of each PFI contract.

[stemis] 18/5/2018 10:02

Looking at the numbers JLIF pretty much seems to distribute all/just the unwinding of the discount factor less running costs (which in 2017 amounted to £91,830k - £24,249k = £67,581k cp to dividend cost of £65,758k).

At the moment this amounts to a dividend yield of 6.3% (7.14/117.5).

Because the discount is compound, the £ value of the unwinding of the discount factor should itself grow by the discount rate (which is 7.5 - 9%) and if costs don't then the profit should grow by even more.

However it looks like they are only increasing the dividend by around inflation - 2/2.5%. So the NAV should grow by the balance (and also by any 'value enhancements' or changes to discount rates (which are just timing issues) or exchange rates). By the time the PFIs run out, the NAV should be all cash.

So, in summary, an investment in JLIF gets you a 6.3% yield, growing at around 2/2.5% a year and your capital back at the end which will have grown by 5%+ pa.

Anyone see any flaws in that? Jonwig?

[spectoacc] 06/4/2018 08:07

Thanks @jonwig. Infrastructure trust investors suddenly spoiled for choice - I've rather too much in HICL already.

[jonwig] 06/4/2018 07:59

Spec - the chart on p34 of the AR shows you: zero. (In 2054.) Remember that the NAV is calculated on a DCF basis.

[spectoacc] 06/4/2018 07:47

At risk of stating the obvious - after the "...Between 20 and 30 years..", what's left, assuming the worst-case of no new investments?

[jonwig] 06/4/2018 07:00

IC have a pretty strong 'buy' recommendation today. Summary:

Even if the trust remains at a discount and has limited ability make new investments, 53 per cent of its assets have between 20 and 30 years left on their concession term.

So, if you are an income investor who can stomach the risks, John Laing Infrastructure Fund's steady income stream, high yield and historically wide discount to NAV make it an attractive contrarian opportunity.

Ex div yesterday adds to the price attractions. Dividend 6.96p means yield of 6.3%. They don't seem to have a forecast dividend for 2018.

[spectoacc] 29/3/2018 13:02

Hand in hand with not being able to raise new equity, is perhaps not needing to - the feeling that infrastructure trusts have gone largely ex-growth. Not sure that's accurate - PFI certainly, and HS2 badly needs binning, but infrastructure in general is always needed.

Still only a small holding here (& much larger in HICL) - feels like further to fall.