Infrastructure: Strong Growth on the Cheap
Tideway is building a super-sewer under the Thames
Credits: Getty Images/MoneyWeek
The sector’s investment trusts have suffered a setback recently, but the long-term outlook remains compelling, says Max King. He assesses the performance and prospects of the industry’s key players
The era of rising interest rates proved challenging for companies in the infrastructure sector, and though share prices experienced a rally in late 2023, along with government bonds, they suffered a setback early this year, with valuations falling between 5% and 10%.
In the renewables industry, the weakness can be attributed to overcapacity, low energy prices and long delays in getting new projects connected to the national grid. Shares yield an average of nearly 7% and trade at an average discount to net asset value (NAV) of 17%, but “power prices are likely to be a headwind”, writes Iain Scouller of brokers Stifel.
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