DBI +2.69%: delivered another solid half, with earnings growing, distributions stepping higher and management reiterating its medium-term target for ongoing dividend growth. For a stock we primarily own for income, the result was very much in line with our expectations.
The key attraction remains DBI’s regulated infrastructure model, which provides a relatively predictable earnings stream while allowing distributions to grow as the Terminal Infrastructure Charge (TIC) increases and additional capital is deployed into the asset.
Key results:
- Net profit A$49.2m, +14%, from A$43.1m.
- EBITDA A$150.5m, +4.7%.
- Total income A$434.2m, +9.5%.
- Terminal Infrastructure Charge revenue A$156.5m, +3.6%.
- EPS increased to 9.9c, from 8.7c.
- June-quarter distribution 6.75c per security.
- Distribution guidance for the year commencing 1 July is 28.62c per security, up 8.5%.
- Management continues to target 3–7% annual DPS growth for the foreseeable future.
- The FY27 TIC has been set at A$4.02/t, an 8.1% increase on the prior year.
The most important number for us is the distribution guidance. At 28.62c per security, DBI is offering a forward yield of around 5.5% at $5.21, before factoring in any further growth beyond FY27. Bloomberg estimates have DPS rising to around 30.8c by FY28, implying a yield approaching 6% at the current share price.
The higher TIC is also supportive. DBI’s regulated structure allows it to earn a return on its asset base, meaning additional investment in the terminal can ultimately support higher revenue and distributions. Management remains focused on completing the shiploader and reclaimer projects on time and budget, with expected costs of A$165.4m and A$115.6m respectively.
There is some movement in the headline earnings numbers as depreciation, financing costs and the timing of capital expenditure flow through, but we don’t think that changes the underlying investment case. What matters is the resilience of cash earnings, continued growth in the regulated asset base and DBI’s ability to translate that into steadily higher distributions.
MM’s view: We own DBI primarily as an income investment and this result reinforced the reasons why. Earnings remain resilient, the TIC is stepping higher and management is guiding to 8.5% distribution growth in FY27, comfortably above its longer-term target of 3–7%.
At around 15x forward EBITDA and a forward yield in the mid-5% range, DBI isn’t screamingly cheap, but we think the combination of predictable cash flows, growing distributions and regulated infrastructure exposure remains attractive. The recent pullback is a buying opportunity.
MM remains long & bullish DBI for Income
Add To Hit List
