Sequoia Economic Infrastructure Income (SEQI)
27/06/2024
Results analysis from Kepler Trust
Intelligence
Sequoia Economic
Infrastructure Income (SEQI) has released its financial results for
the year ending 31/03/2024. Over the year, the trust saw its NAV
increase by 8.1% on a total return basis, in excess of its target
return of 7-8%.
SEQI paid a total dividend of
6.875p per ordinary share which represents a yield of 8.7% on the
share price at the time of writing. The trust delivered a total
share price return of 9.6%, helped by a modest narrowing in its
discount from 13.8% to 13.5%. The discount has since widened to
16.2%.
The managers have been active
in portfolio management, increasing the proportion of fixed rate
investments from 42% to 58% over the financial year to position the
portfolio to take advantage of the expected fall in interest
rates.
The managers and board also
continue to take a proactive approach to capital allocation,
repaying the revolving credit facility to reduce net debt to zero
and returning £88 million to shareholders via a share buyback
programme.
Chair James Stewart
commented: "I am pleased to announce another resilient year of
performance, despite ongoing challenges in the macroeconomic
backdrop."
Kepler
View
Sequoia Economic
Infrastructure Income (SEQI) generates a high yield for investors
by lending against infrastructure projects backed by the security
of tangible physical assets. The infrastructure sector is forecast
to enjoy strong growth from mega-trends such as digitalisation and
decarbonisation, which require trillions of pounds of
investment.
This has led to a significant
growth in private sector financing as a means of plugging the gap
from government spending. We think SEQI is well-positioned to take
advantage of this opportunity as the only listed economic
infrastructure debt vehicle in the UK. One of SEQI's strengths is
the diversification of its portfolio, with around 55 investments
across 30 sub-sectors.
Against a challenging
backdrop for alternatives, SEQI has delivered a strong set of
results with a NAV and share price total return of 8.1% and 9.6%
respectively. This was primarily due to its focus on credit quality
through the year.
In our view, SEQI could be an
attractive proposition for investors seeking exposure to the
infrastructure sector, which offers defensive qualities in addition
to strong secular growth themes. While there would be some negative
impact on income from falling interest rates, the managers'
decision to build up fixed rate exposure has counteracted some of
this. We think the dividend looks sustainable over the coming year,
thanks to the high amount of liquidity available and the current
outlook for rates. Given the likely positive impact of falling
rates on the valuation of the portfolio, we think there is the
potential for strong total returns in such an environment from the
8.7% dividend yield plus capital upside from pull to par and a
possible narrowing of the discount.
CLICK HERE TO READ THE FULL REPORT
Visit
Kepler Trust Intelligence for more high quality
independent investment trust research.
Important information
This report has been issued by Kepler
Partners LLP. The analyst
who has prepared this report is aware that Kepler Partners LLP has
a relationship with the company covered in this report and/or a
conflict of interest which may impair the objectivity of the
research.
Past
performance is not a reliable indicator of future results. The
value of investments can fall as well as rise and you may get back
less than you invested when you decide to sell your investments. It
is strongly recommended that if you are a private investor
independent financial advice should be taken before making any
investment or financial decision.
Kepler Partners is not authorised to
make recommendations to retail clients. This report has been issued
by Kepler Partners LLP, is based on factual information only, is
solely for information purposes only and any views contained in it
must not be construed as investment or tax advice or a
recommendation to buy, sell or take any action in relation to any
investment.
The information provided on this
website is not intended for distribution to, or use by, any person
or entity in any jurisdiction or country where such distribution or
use would be contrary to law or regulation or which would subject
Kepler Partners LLP to any registration requirement within such
jurisdiction or country. In particular, this website is exclusively
for non-US Persons. Persons who access this information are
required to inform themselves and to comply with any such
restrictions.
The information contained in this
website is not intended to constitute, and should not be construed
as, investment advice. No representation or warranty, express or
implied, is given by any person as to the accuracy or completeness
of the information and no responsibility or liability is accepted
for the accuracy or sufficiency of any of the information, for any
errors, omissions or misstatements, negligent or otherwise. Any
views and opinions, whilst given in good faith, are subject to
change without notice.
This is not an official confirmation
of terms and is not a recommendation, offer or solicitation to buy
or sell or take any action in relation to any investment mentioned
herein. Any prices or quotations contained herein are indicative
only.
Kepler Partners LLP (including its
partners, employees and representatives) or a connected person may
have positions in or options on the securities detailed in this
report, and may buy, sell or offer to purchase or sell such
securities from time to time, but will at all times be subject to
restrictions imposed by the firm's internal rules. A copy of the
firm's Conflict of Interest policy is available on
request.
PLEASE SEE ALSO OUR TERMS AND CONDITIONS
Kepler Partners LLP is authorised and
regulated by the Financial Conduct Authority (FRN 480590),
registered in England and Wales at 70 Conduit Street, London W1S
2GF with registered number OC334771.