3i Infrastructure (3IN) 305p

Loss to date: 3.2%

We recommended buying investment trust 3i Infrastructure (3IN) on the strength of its portfolio, which is made up of companies providing ‘must-have’ services not just ‘nice-to-haves’, and its ability to add value to those businesses and monetise the investments when the opportunity arises.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

The company has exceeded expectations, generating a first-half total net asset value (NAV) return of 6.3% against its full-year target of between 8% and 10%, lifting NAV per share to 351p, despite taking a sizeable write-down on the value of one of its smaller businesses.

The key event of the first half was the sale of its 25% stake in Dutch waste treatment business Attero at a 31% premium to its last valuation in March 2023, with the proceeds going to paying down part of its revolving credit facility.

Meanwhile, underlying earnings from its investee companies have continued to grow by double digits and the businesses themselves are almost entirely self-funding when it comes to their investment needs.

‘3i Infrastructure’s results demonstrate the quality of its portfolio investments and benefit of its active management approach which has resulted in another period of NAV returns ahead of target,’ say analysts at Numis.

While we expect more disposals and debt reduction down the line, for the time being the firm is earning a healthy spread over its cost of borrowing and is approaching a neutral net debt position.

WHAT SHOULD INVESTORS DO NOW?

With interest rates appearing to have peaked, in the UK at least, we expect investors will start to look once again at so-called ‘long-duration’ assets such as infrastructure and 3i Infrastructure has the highest-quality portfolio on offer.

The shares are little changed since July while the NAV has risen, so the discount is now 11.6% compared with 5% four months ago, making this an ideal time to add to holdings.

Numis describe the current share-price rating as ‘undemanding for access to a high-quality portfolio and proven management team’. We couldn’t agree more. Keep buying the shares. 

Disclaimer: The author owns shares in 3i Infrastructure

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