3i Infrastructure total return rises 10.8% on rolling stock gains
Investment company 3i Infrastructure generated a total return of 10.8% over the last six months driven by the large growth in the value of investments in railway rolling stock.
The FTSE 250-listed company said it was continuing to see returns compression in the infrastructure market and particularly in core infrastructure, "driven by a broadening of the investor universe and an increase in asset allocations to this sector, as investors seek yield in a low interest rate environment".
A £117m total return for the first half of the year was a 10.8% improvement on opening net asset value (NAV), driven by the performance of the European portfolio and value gains from rail rolling stock companies Eversholt Rail and XLT.
3i did not investment any new money during the period due to competitive market conditions, but did commit to investing £12.7m in three new primary public-private partnership (PPP) projects: the A12 motorway and the RIVM public health building projects in the Netherlands, together with a new campus for Ayrshire College in Kilmarnock, Scotland.
The performance of its India Fund continued to disappoint, with a local currency return down 6% despite previous hopes that the political outlook would improve following April's general election win for Narendra Modi.
Although the value of the Indian rupee against sterling stabilised, resulting in lower foreign exchange losses compared to the prior year, underlying investment were hit by issues included availability and pricing of fuel and construction delays.
But the company made its first realisation from the India Fund during the period, carrying out a partial sale of Adani Power that generated £7.4m.
Chairman Peter Sedgwick said: "The company generated a very strong return in the first half of the year, supported by the robust performance of the assets in its European portfolio. As we go into the second half of the year, we have a healthy pipeline of core infrastructure and primary project investments."
Three primary PPP deals are expected to reach financial close in the second half, requiring a total commitment of between £50m and £60m.
Broker Westhouse Securities notes that 3IN shares trade on a premium of around 8% to NAV, yielding 5% historically.