London, UK, 24 April 2024
Edison issues initiation on International Public Partnerships (INPP): Consistently and responsibly delivering
International Public Partnerships’ (INPP’s) FY23 results show that it continues to deliver consistent and predictable returns for investors, while delivering environmental and social benefits for the individuals and communities that are served by its assets. Despite this strong performance and a substantial need for private infrastructure funding, the macroeconomic environment has weighed on INPP’s share price, in common with the wider sector. Regardless, attractive returns are available from the existing portfolio with opportunities for further enhancement.
INPP’s assets continue to perform well, it is a beneficiary of higher inflation and has a strong level of protection against higher interest rates, yet its shares have de-rated in line with the sector as interest rates rose. INPP’s 18% discount to NAV is in line with its peer group average, but we do not believe this is the appropriate comparison, given the characteristics of INPP’s portfolio and its long track record of performance. The company’s FY24 target DPS of 8.37p represents a yield of 6.7%, and INPP predicts that the cash flows from the existing portfolio alone, even without any new investment, are sufficient to meet progressive dividends for at least the next 20 years. Versus the expected NAV 8.4% return and reflecting the discount rate of 8.4%, the share price implies a net return of 9.4%.
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