ALI – Argo Global Listed Infrastructure

Not been any post on this for quite a while …. and probably for good reasons, back then. Argo Global Listed Infrastructure (ALI) IPO in July 2015 was received poorly and bounced along below the $2.00 issue price from then until Jan 2019, after which it has been on a tear (for a boring stock often treated as a bond proxy). The overhang of ALIO options probably didn’t help, but all that has been digested by 2018 and the SP now hitting heights of $2.70 on today’s Half Yearly results.(though still behind the NTA which is provided to the market on a weekly basis, as well as informative Monthly reports).

The company invests in a diversified portfolio of global infrastructure securities, consisting of an actively managed, diversified set of global listed infrastructure securities and global infrastructure fixed-income securities, diversified by country and sub-sector.
http://www.argoinfrastructure.com.au/

Transportation – Toll Roads, Airports, Marine Ports, Railroads
Energy – Transport, Storage, Gathering & Processing, Renewables
Utilities – Electric Utilities, Gas Utilities, Water
Communications – Wireless Towers, Satellites

It’s an Aussie LIC; Argo (ARG) in Australia manages the back office, receives a fee but the portfolio is run by Cohen & Steers, a NYSE listed company specialising in global real assets management.

Infrastructure assets were named as a contributing factor to the performance differentials between some super funds. There are barriers to investing in unlisted infrastructure assets, such as illiquidity, but other strategies are seen to deliver similar outcomes over the long term which are readily accessible to investors at both the institutional and individual level.

Global listed infrastructure is one example. With the benefit of diversification and high liquidity, this asset class has experienced a large take-up by investors globally. Recent Morningstar data shows that allocations to infrastructure within multi-asset funds has grown by around 400 per cent over the past five years.

…. observers will notice an increasing amount of Strategic Asset Allocation theory and discussion being directed toward Global Infrastructure. The infrastructure sub-category fits within the Equities asset class with both listed and unlisted products available to investors. The category typically encapsulates assets within the Transport (toll roads, ports and airports), Utilities (electricity, gas and water) and Communication sectors (towers and satellites).

Infrastructure assets offer essential services to an economy. User demand is predictable and reliable through economic cycles, and volume is usually price inelastic. Competition is limited, with market structures typically monopoly or duopoly. Assets are typically long-life, with high upfront capex followed by strong cash flow generation. Prices are often regulated and/or subject to longterm contracts. CPI-linked pricing is typically a feature, providing a quasi-inflation hedge. The nature of the cash flows means that infrastructure generally offers investors lower potential returns but with lower inherent risk when compared with traditional equities.

Investor demand for exposure to infrastructure asset returns is surging in response to the stability of infrastructure earnings in an otherwise uncertain economic environment. The ultra-low interest rate environment is also forcing yield seeking investors into alternative income oriented investments. Overall the category is useful for delivering capital risk diversification and yield enhancement within the Equity asset class.
Morgans

Jason Beddow, managing director of Argo Global Listed Infrastructure, says fiscal constraints in Western countries are creating opportunity. “Governments worldwide need to invest heavily in infrastructure to keep up with population growth but most do not have the balance sheet, so are encouraging private capital. The long-term outlook for global infrastructure has never been stronger.”

Beddow says global infrastructure suits investors who are overexposed to Australian shares and property. “You’re getting diversified exposure to ports, water, utilities, telecommunication towers, electricity generators and other assets, across developed and emerging countries. Chosen well, global infrastructure should provide a mix of yield and growth, with lower volatility.”

So….
For the half-year to 31 December 2019, the portfolio delivered a total return of +6.5%, more than double the +3.1% delivered by the Australian equity market.
A 3c ff dividend announced

Argo Infrastructure’s share price has also performed very strongly, returning +32.5% over the 2019 calendar year, which significantly improved the share price discount to NTA from -15.7% to -7.8%. The discount has narrowed further since then and the share price recently achieved a record high of $2.68

And a pro-rata entilement issue, 1:6 at $2.25 with top up, and book close 20 Feb (still open)
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