Last close As at 05/08/2026
GBP1.45
▲ 0.20 (0.14%)
Market capitalisation
GBP2,589m
Research: Investment Companies
International Public Partnerships (INPP) recently held a strategy day. This provided a detailed overview of its business and the outlook for a continuation of the strong, predictable, inflation-linked returns that have been generated since the company listed in 2006. INPP’s operational and financial performance is at odds with its discount to NAV and the company has a clear strategy to address this. No new financial details were provided ahead of INPP’s 2023 results, due to be published on 28 March.
International Public Partnerships |
Capital markets day |
Investment companies |
6 March 2024 |
Analyst
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International Public Partnerships (INPP) recently held a strategy day. This provided a detailed overview of its business and the outlook for a continuation of the strong, predictable, inflation-linked returns that have been generated since the company listed in 2006. INPP’s operational and financial performance is at odds with its discount to NAV and the company has a clear strategy to address this. No new financial details were provided ahead of INPP’s 2023 results, due to be published on 28 March.
Consistent operational and financial performance
INPP is aiming to deliver consistent and predictable returns for investors, while delivering environmental and/or social benefits for the individuals and communities that are served by its assets. Underpinning INPP’s investment strategy is a focus on what it expects to be lower-risk assets, providing essential public infrastructure services, with revenues that are generally ‘availability based’ or regulated and significantly government-backed. The portfolio is well diversified, geographically and by type of assets, and the underlying cash flows provide a high level of inflation linkage and protection against the impact of rising debt costs on equity returns. The investment adviser is Amber Infrastructure, which has a large, well-resourced in-house asset management and origination team. Amber Infrastructure’s ability to actively and responsibly source and manage INPP’s investments, and enhance their performance, is one of the company’s core strengths, and its responsible approach to investment is demonstrated in the second Sustainability Report (published in 2023).
Addressing the discount to NAV
INPP has grown its DPS each year, since its IPO, at a target long-term rate of c 2.5%. To better reflect the positive inflationary impact on cash flows, the 2023 DPS target was increased to 8.13p (+5% vs 2022), with the 2024 target rebased in line with the c 2.5% long-term growth target, and at a level that INPP expects to be sustainable. In fact, the company believes the projected portfolio cash flow is sufficient to cover targeted dividends for at least the next 20 years without any need for further investment. The board and INPP are focused on closing the share price discount to NAV. At c 17% it is not materially out of line with the AIC sector 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. Alongside the DPS step-up, capital recycling has facilitated the repayment of relatively high costs debt, underlined the robustness of asset valuations, provided funding for accretive reinvestment and generated capital for ongoing share repurchases.
Predictable returns
Based on the 2024 target DPS of 8.33p, the shares are yielding 6.5% and are trading at an 17% discount to NAV. INPP calculated that, based on the share price at 31 December 2023 (137.4p), the implied projected total return was 8.6%, which was more than 4.5pp above a 30-year gilt at the time (4.1%).
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Research: TMT
Reach’s FY23 figures were broadly in line with market expectations. The key messaging, though, is that the two big uncertainties overhanging the stock are being clarified in timescale and in quantum. Firstly, agreement has been reached with the pension trustees, substantially reducing the ongoing funding requirement from FY28. Secondly, December’s High Court ruling on time limitation for the historical legal issues gives far better clarity on the amounts to be paid out and shortens the execution timescale. This gives management much improved context in which to plan the necessary investment from cash flows to continue to boost the data-driven revenue line. We would expect the substantial valuation discount to start to narrow.