BBGI Global Infrastructure 09 November 2022

BBGI Global Infrastructure (BBGI) is a responsible investor with a strong ESG approach which invests in and actively manages a global portfolio of low-risk essential social infrastructure assets for the long term, diversified across highly rated investment-grade countries. Its £1.1bn portfolio is over 99% operational and as at September 2022 consists of 56 different investments, c. 87% of which are majority owned by BBGI.

BBGI invests in availability-based infrastructure assets and those that are backed by secure government revenues with high-quality inflation linkage. Availability-based assets attract contractual revenues as long as they are available for use by stakeholders, and do not vary by changes in GDP or by how much they are used (see Portfolio section). This ensured that BBGI had no material financial impacts from the COVID pandemic lockdowns, unlike some of its peers.

Despite a challenging macroeconomic backdrop, BBGI is clear that its resilient and defensive strategy and differentiated low-risk portfolio should continue to provide long-term, predictable, inflation-linked and sustainable shareholder returns. To the end of the last reporting period (30/06/2022), BBGI had delivered an annualised return since IPO of 9.3% on an NAV total return basis.

BBGI has paid a steady stream of growing dividends since it was launched in 2011, having delivered a compound average increase in annual dividend of 3.1% between 2012 and 2021. Dividends are paid semi-annually, and the shares currently yield 4.7%.

BBGI is internally managed, with the managers and staff being directly employed, so the team are 100% focussed on BBGI and fully aligned with shareholders, plus the OCF is the lowest in the peer group. As has been the case in the past, as BBGI grows, the OCF is likely to reduce further.

In our view, BBGI occupies a clear niche within the listed infrastructure peer group. BBGI targets government-backed revenues for all of its projects, and invests in those that are availability-based with a strong approach to ESG and high-quality inflation linkage (see Portfolio section). As a result, BBGI was entirely unaffected by the COVID pandemic lockdowns that were imposed, allowing it to outperform its peers in NAV total return terms over the last five years.

Geographic diversity is another differentiator to peers, which typically have a strong bias towards the UK compared to BBGI’s current 33% UK exposure. By diversifying across different economies and political systems, overall returns should be smoother. As we discuss in the Portfolio section, with 100% availability-based assets, BBGI’s portfolio arguably has the cleanest exposure to inflation without the price elasticity considerations of demand-based assets. BBGI’s availability-based cash flows have entirely mechanical links to inflation. As such, whilst the theoretical sensitivities of peers to inflation are perhaps slightly higher than BBGI’s are, the practical reality is less clear-cut.

BBGI has generally attracted a higher premium than peers, which we believe is a function of the fact that the portfolio is 100% availability-based and ongoing charges have come down over time. The supply of new shares in BBGI has been lower than the supply of shares for peers, which could also be the reason for its premium rating relative to peers. BBGI currently trades at a 7.2% premium to its historical NAV, well below its five-year average premium of 19.6%.