Based on fundamental scores, which incorporate safety metrics such as yields, profitability, historical performance and sentiment, Hong Kong-listed Yuexiu Transport Infrastructure and NWS Holdings appear to be undervalued. Even then, their growth outlook is likely to be very modest.
SINGAPORE (Oct 28): Infrastructure is expensive and the payback takes a long time, making it a long-term investment. As evidenced by the experience of investors in Singapore, investing in infrastructure can be challenging. For instance CitySpring Trust, which initially owned a stake in a desalination plant and City Gas, had to merge with Keppel Infrastructure Trust because the former’s returns were not optimal for yield investors. Hutchison Port Holdings Trust, which owns ports in China and Hong Kong, has been hit by falling throughput and is now a fraction of the price of its IPO, back in 2011. Chart 2 shows that HPH Trust has the worst profitability among infrastructure, construction and engineering stocks in the region. At any rate, ports and airports take years to conceptualise and build, and their returns are phased in gradually.
The profitability of construction stocks such as KSH Holdings, Lian Beng Group and Wee Hur Holdings is relatively low, as evidenced by their position on Chart 2.
