BBGI Global Infrastructure S.A.

[johnstevens77]

Any ideas why the 10.5% discount? A year ago it was at a 10% premium. Yield is 5.6%.

john

[thebarns]

Similar movements have taken place in almost all infrastructure and renewable investment trusts, so this does not appear to be a BBGI specific issue.

Broadly it is a reflection of the increased rates available on gilts, which are seen as more secure investments. As gilt yields have moved from 1% to 4-5%, then the yields demanded from investors of the infrastructure and renewable trusts have also increased causing their share prices to fall. In addition the share prices have also fallen, partly over concerns relating to the debt that some of these investment trusts carry and terms of refinancing due over the next few years will have worsened. Also their asset values are normally calculated using a discount rate which will broadly move in line with general interest/gilt rates and as these have worsened, so have the net asset valuations.

Quite a number of these trusts have actually increased their dividend payouts over the last year and so yields have significantly increased as dividends have risen and valuations fallen.

IF these payouts are sustainable in the medium term future and are not hampered by terms of debt refinancing and other matters affecting income, eg some are energy price related, then it may be a good time to buy.

However the counter is that if rates stay elevated for a long period of time, then this may well impact future payouts once refinancing terms kick in. Also, if rates stay elevated for a long time then a gilt yielding 5% could be viewed as carrying less risk and so investors may require prolonged and sustainable yields of 6-8% from these infrastructure and renewable trusts to compensate them for the extra risk.

[johnstevens77]

A good analysis thanks. Reminds me of the 1970's. However I am still looking for infrastructure and alternative energy income, so will continue my search for something sustainable. At the moment, I have medium holdings in UKW and 3in. (3in is not high income but has a good record of dividend increases).

john