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October Investor Forum: Shareholder value in ESG investing

BBGI Global Infrastructure

NAV and dividend up ‒ 10.4% TSR p.a. from 2011

12 Apr 2022 / Corporate research

BBGI is a diversified social infrastructure investment company, registered in Luxembourg, and a FTSE 250 constituent. Its portfolio consists of long-term and low-risk essential social infrastructure investments, which deliver stable, predictable cashflows, with progressive dividend growth and attractive, sustainable returns. It focuses on enhancing the value of its investments, which are globally diversified within highly rated, investment-grade countries. All investments are via Public, Private Partnerships (PPPs) or derivatives thereof, and all its investments are availability-based ‒ not demand-based ‒ supported by government-backed revenues; hence, the cashflow line is highly reliable, with a good inflation hedge.

  • Background: Central to BBGI’s business are its 55 essential, social infrastructure investments ranging from bridges in North America to a hospital facility in Australia. Crucially, its equity portfolio comprises low-risk and public-sector-backed, availability-based infrastructure investments, with good inflation linkage.
  • Operations: BBGI’s main operating jurisdictions are in North America, specifically Canada, and in the UK. Revenues from all BBGI’s investments are based on their availability, and not on the level of demand for them; hence, there is a bond-like predictability about future revenues.
  • Valuation: BBGI has built up a successful track record since its 2011 IPO, with total shareholder returns averaging 10.4% p.a. It has consistently traded at a premium to NAV; currently it is 23.7%. Since 2016, this premium has gradually risen. BBGI’s shares yield 4.3%, based on the prospective 2022E dividend.
  • Risks: All BBGI’s cashflows are from government or government-backed bodies, thereby reducing the counterparty risk factor considerably. Owing to the absence of demand-based investments, the impact of COVID-19 on BBGI’s finances and operations has been marginal – unlike some of its peer group.
  • Investment summary: In the quest for reliable dividends, some institutional and retail investors may well focus on UK infrastructure investment companies (IICs), with their secure dividend profiles. The prospective sector yield is now just below 5%. Following its 2021 full-year results, published on 31 March 2022, BBGI confirmed its dividend targets ‒ 7.48p per share for 2022E, 7.63p per share for 2023E and, for the first time, 7.78p per share for 2024E.
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