GCP Infrastructure – Substantive progress
SWOT and bull vs. bear analysis
| Strengths | Weaknesses |
|---|---|
| Diversified portfolio across a range of infrastructure subsectors and borrowers | Relatively illiquid portfolio |
| Public-sector backed cashflows | Historically, GCP has exhibited more sensitivity to factors such as power prices than might be expected of a debt fund |
| Low gearing | Need to tackle persistent wide discount is preventing it from making new investments |
| Responds positively to higher inflation | |
| Conservative valuation assumptions | |
| Opportunities | Threats |
| Discount narrowing potential | Rising UK interest rates |
| Government needs private capital to fund infrastructure | While discount persists, vulnerable to activist investors |
Source: Marten & Co
| Bull | Bear | |
|---|---|---|
| Performance | Despite the odd setback, NAV has been relatively stable since launch | NAV returns have been on the low side in recent years, dragging down long-term averages |
| Dividends | Dividend looks increasingly reliable and headline yield is very attractive | Dividend cut in 2020 and flat dividend since at odds with rising returns from other debt investments |
| Outlook | Should be set fair if it can continue to deliver on its capital recycling programme | Need to see progress on social housing disposal that was flagged some time ago. Further delay/NAV writedown could undermine confidence |
| Discount | Discount appears to be on narrowing trend and there is more to go for | If confidence in UK economy and government finances was shattered, discount could widen again |
Source: Marten & Co
For Anoraks
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