For subscribers not familiar with ALX, it was established following the 2010 split of Macquarie Infrastructure Group (MIG) into two separate ASX-listed securities. ALX’s two main international toll road assets are Autoroutes Paris-Rhin[1]Rhone, APRR (France, 31%) and Chicago Skyway (US, 67%). The stock has struggled since interest rates started to increase in 2022, falling by -15.7% year-to-date but if and when the RBA follows the Fed and begins cutting, things should improve. The stock is currently yielding ~8%, unfranked, which is attractive when we have some stability in the share price.
We forecast that it will take until FY27 before underlying cash flow supports growth in the distribution. In the meantime, existing cash and further capital releases will close the gap, hence the share price weakness. However, there is the possibility of renewed takeover interest from major shareholder IFM, who currently owns 25.87%. We believe it’s a case of when, not if; hence, there is justification for ALX below $5 to sit in an income portfolio as a medium-term “sleeper” style holding.
- We think ALX is slowly showing some appeal as a yield play, but it is unlikely to surface on MM’s Hitlist in 2024, it’s more of a 2025/26 play.
MM is cautiously bullish toward ALX
Add To Hit List
