The Telegraph’s Questor Column thinks markets are being “irrational” when it comes to valuing London’s renewable infrastructure funds and believes Bluefield Solar Income Fund (BSIF) is one of many bargains to be had; while The Times’ Tempus flags how a deal to develop a large data centre near Heathrow could be a game-changer for Tritax Big Box Reit (BBOX).

By Frank Buhagiar

Questor – There’s money to be made waiting for the regulator to fix its problems

The Telegraph’s Questor Column thinks markets are being “irrational”, at least when it comes to valuing London’s renewable infrastructure funds. That’s because share prices across the space continue to trade at gaping discounts to net assets despite news of the £1bn takeover of BBGI Global Infrastructure by a Canadian fund at a 21% premium to the then prevailing share price. “Remarkably, despite the obvious potential upside for investors if this turns out to be the first of many such deals, share prices of UK-listed infrastructure trusts barely moved. Share price discounts to net asset value (NAV) in the renewable energy sector, which shares many similar characteristics, actually widened.”

Questor blames the Financial Conduct Authority and unfair cost disclosures rules that discourage wealth managers from buying trusts for their clients. “There is considerable anger within the industry over this failing, but while we wait for it to be addressed, there are bargains to be had.” One of which is Bluefield Solar Income Fund (BSIF). Questor admits “It is not the cheapest of these trusts, yet it does trade on a discount that implies a greater than 50% upside if it reverted to trading at NAV, as it did for almost all of its life up until May 2023.” There’s also a double-digit yield based on a dividend that is well covered by earnings and cash flow. And it belongs to “a growing sector, where conditions are moving in its favour. It is also focused solely on the UK, so does not come with currency risk.”

As the name suggests, the portfolio is dominated by solar assets, all of which are operational: as at end of September 2024, the portfolio consisted of 824MW (megawatts) of solar and 58MW of onshore wind. To drive future NAV growth the fund has a 1.5GW+ development pipeline which, as well as solar, includes battery storage projects. Problem is, the wide discount means new shares cannot be issued to finance the pipeline. So, BSIF has secured funding from a consortium of UK pension funds. As for the discount, Questor notes that like most of the sector, BSIF’s discount widening was triggered by rising interest rates. Yet despite UK interest rates being cut three times from their peak, “the trust’s share price has continued to slide. Questor believes that Bluefield Solar is oversold.”

Tempus – Should you buy shares in Tritax Big Box Reit?

The Times’ Tempus appears to immediately answer its own question with its opening line “A deal to develop a large data centre near Heathrow will be a game-changer for the warehouse investor”. To be clear Tritax Big Box Reit (BBOX) is already no tiddler – the £3.6bn market cap has a portfolio of warehouses let to blue-chip customers including Amazon, B&Q and Ocado.

So, what’s the big deal about the big deal? BBOX plans to turn 74 acres near Heathrow airport into a major data centre. Work to create 448,000 sq ft of data halls across three floors is due to start in the first half of next year and there could be scope to add further capacity in the future. The scheme is subject to planning approval, but as Tempus notes “it would be a brave local authority that turned this down in defiance of a government desperate for economic growth.” And doesn’t sound like BBOX intends to stop there – management has said they want data centres to become “a meaningful part of the portfolio”. Tempus thinks this would have a positive impact on profits as the data centre project is set to generate a 9.3% yield compared to 7% for new logistics centres.

In terms of funding, Tempus points out BBOX has “plenty in the locker”. Last year’s all-share acquisition of UK Commercial Property Reit added higher yielding small warehouses as well as hotels, offices and leisure centres to the portfolio which were expected to be sold post-merger. Meanwhile, debt currently stands at a relatively low 29% of NAV and there is £500m available to borrow. All of which leads Tempus to conclude: “Advice Buy. Why? Tritax is on the verge of long-term transformation”