Canaccord Genuity raises 3i Infrastructure to 'hold'

(Sharecast News) - Canaccord Genuity upgraded 3i Infrastructure from 'sell' to 'hold' on Wednesday, saying the latest trading update pointed to solid progress in the first half and a strongerthanexpected outlook for net asset value.

The broker said 3i Infrastructure had delivered a "solid" six months, with most portfolio companies meeting or beating return expectations and the group indicating it remained on track to achieve its 4% to 5% target return for the period. With the interim dividend expected to contribute around 1.7%, Canaccord said this implied net asset value growth of at least 3.3%, putting the likely September NAV in the 418p to 420p range, up from 405p at the end of March.

Canaccord noted that 3i's balance sheet was described as "strong", with £267m of net cash and an undrawn £900m credit facility and said it saw scope for one or two new investments over the next six months, while any disposals were more likely ahead of the group's March yearend rather than before December. Income and nonincome cash generation was also robust at £195m, up from £121m a year earlier, helped by a £92m distribution from Joulz following a refinancing.

The Canadian bank said the shares, at 390p, were trading at a 4% discount to the March NAV and around 7% below the implied September figure. While not cheap, the broker noted the portfolio was performing well and saw no obvious downside risks to valuations from discountrate movements.

Canaccord added that while 3i Infrastructure had a strong longterm record, the portfolio remained concentrated and carried a high risk/high reward profile, with the top five assets accounting for around 70% of NAV. It said a discount of roughly 10% remained appropriate given that concentration.

Reporting by Iain Gilbert at Sharecast.com