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International Public Private Partnership (INPP)

Closed-end funds and OEICs
Walkeia
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International Public Private Partnership (INPP)

#496378

Postby Walkeia » April 25th, 2022, 4:44 pm

INPP is raising funds at 159.5p - closes EoD 27th April; results 29th April. After watching HICL and this name for a while I decided to take the plunge today and bought as part of my income holdings. Here’s a few points why; I would be interested if others have any views on this name they wished to share.

https://www.internationalpublicpartners ... aft_vf.pdf

1. Slide 5 & 7: Dividend is x1.1 covered; expected to grow at ~2.5% for both ‘22 and ‘23. This is better than HICL which is uncovered and static projection at the moment.

2. Slide 30 - discount trends - while discount rates have dropped by ~1% over the past decade, 30y interest rates (which I think is the appropriate metric given the asset base and matched fixed rate financing) have dropped substantially more. As such the relative constitution of the discount rate is a higher credit proportion vs. interest rate throughout the past decade. Therefore arguably as interest rates rise the existing discount rate has room to rebalance to a more historical mix of interest rate + credit proportions rather than head materially higher outright.

3. Slide 31, 32 & 33 - the key slides which got me across the line to buy the dip caused by this fund raising. This looks at the impact of inflation on their portfolio. Frankly their assumptions are way off what we look set to experience in ‘22 and ‘23. They assume central banks hit their long run inflation targets (2.5% in U.K. - their most important geography. That’s a fair enough assumption but what interests me is the portfolio impact of higher inflation when inflation overshoots - +1.8p if 200bp above (so 4.5%). Given it looks like the U.K. may have ‘22 inflation closer to 8 or 9% this could add almost 5.4p to the NAV; and more the longer inflation persists.

Putting this together I like the balance the investment brings - in that the portfolio appears to have a degree of inflation protection should higher inflation become entrenched or persistent. Conversely, if central banks react significantly on short term interest rates to bring inflation back to target I would argue 30y discount rates will be unchanged as if anything this would strengthen their inflation taming credibility.

Any thoughts welcome

richfool
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Re: International Public Private Partnership (INPP)

#496403

Postby richfool » April 25th, 2022, 7:15 pm

Walkeia wrote:INPP is raising funds at 159.5p - closes EoD 27th April; results 29th April. After watching HICL and this name for a while I decided to take the plunge today and bought as part of my income holdings. Here’s a few points why; I would be interested if others have any views on this name they wished to share.

https://www.internationalpublicpartners ... aft_vf.pdf

1. Slide 5 & 7: Dividend is x1.1 covered; expected to grow at ~2.5% for both ‘22 and ‘23. This is better than HICL which is uncovered and static projection at the moment.

2. Slide 30 - discount trends - while discount rates have dropped by ~1% over the past decade, 30y interest rates (which I think is the appropriate metric given the asset base and matched fixed rate financing) have dropped substantially more. As such the relative constitution of the discount rate is a higher credit proportion vs. interest rate throughout the past decade. Therefore arguably as interest rates rise the existing discount rate has room to rebalance to a more historical mix of interest rate + credit proportions rather than head materially higher outright.

3. Slide 31, 32 & 33 - the key slides which got me across the line to buy the dip caused by this fund raising. This looks at the impact of inflation on their portfolio. Frankly their assumptions are way off what we look set to experience in ‘22 and ‘23. They assume central banks hit their long run inflation targets (2.5% in U.K. - their most important geography. That’s a fair enough assumption but what interests me is the portfolio impact of higher inflation when inflation overshoots - +1.8p if 200bp above (so 4.5%). Given it looks like the U.K. may have ‘22 inflation closer to 8 or 9% this could add almost 5.4p to the NAV; and more the longer inflation persists.

Putting this together I like the balance the investment brings - in that the portfolio appears to have a degree of inflation protection should higher inflation become entrenched or persistent. Conversely, if central banks react significantly on short term interest rates to bring inflation back to target I would argue 30y discount rates will be unchanged as if anything this would strengthen their inflation taming credibility.

Any thoughts welcome

Walkeia, I previously held INPP for several years, but whilst the dividend was fine, I found the capital appreciation was rather modest, if not non-existent, so I eventually sold, for that reason and partly in order to reduce the number of holdings I had, and also because I spotted that INPP will be adversely affected by the planned increase in corporation tax.

https://www.hl.co.uk/shares/shares-sear ... ps-ltd-ord

Walkeia
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Re: International Public Private Partnership (INPP)

#496435

Postby Walkeia » April 25th, 2022, 10:34 pm

Hi Richfool,

Thanks for coming back - agreed on the capital growth; I’m buying for predominantly the income but I do hope for some modest capital appreciate over time (related to a growing dividend I hope).

I did see the implications of higher corp tax; my thinking here was i. as it has been announced it should be reflected in the current share price given the assumptions incorporate it and ii. other U.K. based equities face a similar headwind. But I can totally understand why you sold prior to announcement when this tax hike was muted in the press etc.

Walkeia
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Re: International Public Private Partnership (INPP)

#496436

Postby Walkeia » April 25th, 2022, 10:42 pm

[/quote]
partly in order to reduce the number of holdings I had

[/quote]

Random question but out of interest - how many holdings do you have? This would be my number 9 of a 10 max which is a somewhat arbitrary ceiling I have set myself. My thinking is beyond this I won’t be able to follow everything properly (and this 10 includes names such as VWRL).

richfool
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Re: International Public Private Partnership (INPP)

#496519

Postby richfool » April 26th, 2022, 10:18 am

Walkeia wrote:
partly in order to reduce the number of holdings I had



Random question but out of interest - how many holdings do you have? This would be my number 9 of a 10 max which is a somewhat arbitrary ceiling I have set myself. My thinking is beyond this I won’t be able to follow everything properly (and this 10 includes names such as VWRL).

Hi Walkeia,

Overall, including income, growth and defensive holdings/portfolios, I have 36 IT holdings; though 6 of those are REIT's/Prop Companies and 6 are renewable energy/battery storage companies, and one specialist/speculative holding, so one could net that down to 23 .

richfool
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Re: International Public Private Partnership (INPP)

#496536

Postby richfool » April 26th, 2022, 10:56 am

FWIW, the nearest holding I have to INPP is Ecofin Global Utilities & Infrastructure trust (EGL). It currently yields c 3.73% is at a premium of +1.32% but has much better capital performance than INPP.

(According to HL, link below: 1year = 13%. 2 yrs = 38%. 3yrs = 62% and 5 years = 76%

https://www.hl.co.uk/shares/shares-sear ... ructure-1p

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Re: International Public Private Partnership (INPP)

#496716

Postby Walkeia » April 26th, 2022, 8:55 pm

Thanks Richfool;

Wish I’d found that a year ago as it is heavily utilities weighted - I think explains the capital outperformance more so as the inflation linkage (real yield I think is much clearer for those holdings). My view is the ship has sailed her - So I will plumb for INPP for income here as I add growth in other areas like VWRL.

richfool
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Re: International Public Private Partnership (INPP)

#496740

Postby richfool » April 26th, 2022, 10:43 pm

Walkeia wrote:Thanks Richfool;

Wish I’d found that a year ago as it is heavily utilities weighted - I think explains the capital outperformance more so as the inflation linkage (real yield I think is much clearer for those holdings). My view is the ship has sailed her - So I will plumb for INPP for income here as I add growth in other areas like VWRL.

I'm currently looking at Ecofin US Renewables Infrastructure Trust (RNEP) if that is of any interest:

https://www.hl.co.uk/shares/shares-sear ... ture-trust

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Re: International Public Private Partnership (INPP)

#497424

Postby richfool » April 29th, 2022, 9:32 am

Walkeia wrote:INPP is raising funds at 159.5p - closes EoD 27th April; results 29th April. After watching HICL and this name for a while I decided to take the plunge today and bought as part of my income holdings. Here’s a few points why; I would be interested if others have any views on this name they wished to share.

https://www.internationalpublicpartners ... aft_vf.pdf
Any thoughts welcome


Walkeia, FYI:-
The Initial Issue was oversubscribed several times over, with support from both new and existing investors. In light of this significant demand the Board has elected to increase the size of the Initial Issue from the initial target amount of £250 million to the maximum New Shares available under the Initial Issue, raising gross proceeds of £325 million. Notwithstanding this the demand was such that investors not benefiting from pre-emptive rights have been scaled back. The proceeds raised will be used to pay down the cash drawn portion of the Company's corporate debt facility totalling approximately £156.2 million as at 6 April 2022 and to provide additional resources to pursue the Company's investment pipeline.

Michael Gerrard, Chair of INPP, said: " Thanks to the support of both existing and new investors , we have significantly increased the size of our initial target raise of £250 million, completing a total capital raise of £325 million. The over-subscribed issue firmly demonstrates the attractiveness of INPP's investment case. The proceeds of the capital raise will be deployed to repay the Company's corporate debt facility and support our investment pipeline. We continue to aim to deliver long-term financial returns for investors that also support the drive towards a more sustainable future for the communities we serve.

https://www.investegate.co.uk/internati ... 00047861J/

Walkeia
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Re: International Public Private Partnership (INPP)

#497487

Postby Walkeia » April 29th, 2022, 3:09 pm

Thanks Richfool;

Looks like a decent result - I got filled at 160.2 so I’m happy with the pop on announcement this morning. I expect it’ll be a little heavy for the next few months but don’t see why it can’t get back to trading around 170p. Will lock it away in the income stable - but I will be very interested to see upcoming results given the low inflation projections vs. current reality.

Appreciate the other suggestions re: US renewable infrastructure but this is one I’ll need to find a bit of free time to look at properly and come back on.

gnawsome
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Re: International Public Private Partnership (INPP)

#498188

Postby gnawsome » May 3rd, 2022, 2:01 pm

Is the information re the allocation of excess applications available anywhere.
Its like watching paint dry to see what I may get and what will be returned


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