RARE Listed vs Unlisted Data & Analysis Update

Transcription

1 January 2013 RARE Listed vs Unlisted Data & Analysis Update Contents 1. Investable universe comparison Comparable universe size fund raising and asset growth Regional allocation Comparison of Investable universe sector allocation Comparison of Investable universe asset maturity Comparison of Investable universe sub sector allocation Comparable transaction and valuation analysis Sector transaction vs trading multiples over time Detailed analysis Airport sector Performance and return analysis Year of vintage universe level returns Range of unlisted LP IRRs by year of investment Sector performance comparison... 12

2 RARE Infrastructure 2 1. Investable universe comparison 1.1 Comparable universe size fund raising and asset growth RARE estimates the size of the comparable investment universes as follows: For the listed universe we use the market capitalisation of the RARE 200 For the unlisted universe we use data on total funds raised by unlisted funds plus estimate of direct infrastructure holdings For the listed universe the total equity in assets is equal to 10 of the listed market capitalisation, the investable equity is adjusted for free float For the unlisted universe the equity in assets is the total equity value of all assets acquired, the investable equity is the value of the investor contributed funds Dec 2012, USDb Equity in Assets Investable equity Listed universe 1,600 1,230 Unlisted universe Source: RARE, Factset, Preqin We monitor growth in assets using two metrics: Contribution to total growth in investable equity new funds raised by unlisted funds vs new capital raised by listed companies (IPOs) Contribution to total growth in infrastructure assets acquisitions by unlisted funds vs growth capex from listed companies Contribution to new equity raised Contribution to new assets developed $140 $120 $100 $80 $60 $40 $20 $ Unlisted Funds Raised IPO's $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $ Unlisted infrastructure Listed Infrastructure Source: Preqin, FactSet, RARE calculations, company accounts The listed universe has contributed 8 of new equity raised and 77% of new assets invested over the past 12 years The investment options for listed infrastructure are less cyclical, reflecting the organic nature of most opportunities

3 RARE Infrastructure Regional allocation Europe In this section we compare the geographic exposure of the listed i and unlisted ii investable universes. We compare these exposures with the notional regional GDP weight iii. North America Asia / Pacific Developing Markets 4 25% 35% 25% 15% 5% 15% 5% Source: Factset, Preqin, RARE calculations Europe comprises more than 5 of deals done in the unlisted universe which is considerably overweight in comparison to the region s contribution to world GDP. Listed provides greater regional diversification of the two investment vehicles with a portfolio evenly weighted across regions. On average, 85% of unlisted deals completed were in Europe and North America but only 6 of the world s GDP Both listed and unlisted infrastructure are underweight emerging markets, however the direction is different, listed weight to emerging markets is increasing over time (due to IPOs and capital growth) whereas the unlisted allocation has been decreasing 1.3 Comparison of investable universe sector allocation We compare the sector allocation of listed and unlisted infrastructure by allocating all assets (stocks and investments) to a sector according to the RARE sector categories iv.

4 RARE Infrastructure 4 Unlisted sector allocation Listed sector allocation Community & Social Assets User Pays Assets Regulated Assets Competitive Assets Community & Social Assets User Pays Assets Regulated Assets Competitive Assets Source: Factset, Preqin, RARE calculations The unlisted universe has a greater variety of assets available to invest in but has a higher skew towards the more risky assets classes. 65% of deals done have been in the user pays or competitive asset classes In the unlisted universe there has been a slight shift in risk profile. Deals completed in the last year have seen a fall in competitive assets with an increased focus on regulated and user pays assets whilst the listed universe i.e. RARE 200 has remained unchanged Social Infrastructure was initially a large component of unlisted but has become a smaller part of the universe over the past 10 years 1.4 Comparison of Investable universe asset maturity We compare the asset maturity allocation of listed and unlisted infrastructure by allocating all assets (stocks and investments) according to the stage of development: Greenfield asset has not commenced operations, highest risk / return Developing / Secondary asset has commenced operations but is not mature Mature asset is steady state, lowest risk / return Unlisted asset maturity Greenfield Developing Mature Listed asset maturity Greenfield Developing Mature Source: Factset, Preqin, RARE calculations

5 RARE Infrastructure 5 Greenfield makes up a very small proportion of the RARE 200 with an average of 5% weighting. This is not unexpected given that most projects do not approach the listed market until they are at least in the developing stage Unlisted has had a greater Greenfield weighting with about 22% of deals done since In 2009 deals in Greenfield dramatically increased to over 5 and have continued to remain high with weighting in 2012 The increase in unlisted Greenfield asset allocation has coincided with the increased fund raising and investment activity in the unlisted infrastructure sector 1.5 Comparison of investable universe sub sector allocation The final level of comparison is at the sub sector level (i.e. Electric / North America, Toll Road / Europe) v. Given the different regulatory and macro exposures between different assets in different geographies vi, RARE considers sub sector allocation to be a reasonable proxy for risk factor exposure in a portfolio. The table below shows the largest average sub sector exposure for the unlisted and listed infrastructure universes: Top 5 Sub Sectors Unlisted Unlisted Listed Top 5 Sub Sectors Listed Unlisted Listed Electric Non Infrastructure North America 11% Electric North America 2% 17% Water Europe 9% 1% Electric Asia / Pacific Gas and Oil E&P North America 8% Electric Europe 4% 19% Toll Roads Europe 7% 3% Rail North America 5% Social Infrastructure Europe 6% Diversified Utilities North America 9% Source: Factset, Preqin, RARE calculations, % 4% 7% 61% Historically listed and unlisted portfolios are comprised of differing assets with very little overlap for the majority of the portfolio composition Three of the five largest unlisted sub sector exposures are not represented in listed and vice versa The total overlap (shared allocation) between the listed and unlisted sub sector allocations is only 21% The table below shows the largest sub sector exposure for the unlisted and listed infrastructure over the past year: Top 5 Sectors Unlisted Unlisted Listed Top 5 Sectors RARE 200 Unlisted Listed Airports Europe 11% 1% Electric North America 15% Gas and Oil E&P North America Diversified Utilities North America Toll Roads North America 8% Rail North America 9% Gas Europe 7% 4% Electric UK Europe 2% 8% Gas North America 7% 7% Electric Asia / Pacific 7% Source: Factset, Preqin, RARE 43% 12% 2% 48%

6 RARE Infrastructure 6 Over the past year the unlisted universe has changed composition when compared to historic trends Gas and Oil appear to have become a primary focus as well as user pays assets (Toll Roads, Airports) The composition of the RARE 200 has remained fairly stable over the past year compared to historic trends with the majority weighting still in Electric and North America The overlap between listed and unlisted remains small 2. Comparable transaction and valuation analysis 2.1 Sector transaction vs trading multiples over time RARE maintains a database of transaction multiples in the infrastructure universe. RARE compares transaction multiples against trading multiples for each major infrastructure sector in the listed universe vii. RARE believes that transaction valuations represent a potential proxy for unlisted infrastructure asset valuations. Electric sector EV/EBITDA Multiple outer quartiles of transaction multiples weighted average of listed multiples inter quartile range of transaction multiples weighted average transaction multiple Source: RARE, Bloomberg, Factset

7 RARE Infrastructure 7 Gas sector EV/EBITDA Multiple outer quartiles of transaction multiples inter quartile range of transaction multiples weighted average of listed multiples weighted average transaction multiple Source: RARE, Bloomberg, Factset Toll Road Sector EV/EBITDA Multiple outer quartiles of transaction multiples inter quartile range of transaction multiples weighted average of listed multiples weighted average transaction multiple Source: RARE, Bloomberg, Factset

8 RARE Infrastructure 8 Airport Sector EV/EBITDA Multiple outer quartiles of transaction multiples inter quartile range of transaction multiples weighted average of listed multiples weighted average transaction multiple Source: RARE, Bloomberg, Factset Water Sector EV/EBITDA Multiple outer quartiles of transaction multiples weighted average of listed multiples inter quartile range of transaction multiples weighted average transaction multiple Source: RARE, Bloomberg, Factset Transaction multiples have been above trading multiples for 75% of the periods analysed (five sectors, sixteen years to 2012) The dispersion is asymmetric, transaction multiples are more likely to be substantially above trading multiples than vice versa The greatest disconnect between transaction valuations and listed valuations occurs in the sectors with the fewest available assets toll roads, airports and water

9 RARE Infrastructure Detailed analysis Airport sector 2012 In the table below we highlight the key transactions from the UK / Europe Airport sector in 2012 vs the listed comparable assets: Asset / Target Location Acquiror Transaction Value (USDm) BAA PLC Heathrow Edinburgh Airport Newcastle International Airport Ana Aeroportos de Portugal United Kingdom United Kingdom United Kingdom United Kingdom Qatar Investment Authority China Sovereign Wealth Fund Global Infrastructure Partners EV / EBITDA Regulation 1, Single Till Single Till 1, Not Regulated AMP Capital Not Regulated Portugal Vinci SA 4, Single Till Transaction Average 1, Asset Location Market Capitalisation Range (USDm) EV / EBITDA Range Regulation Aeroports de Paris France 7,165 8, Dual Till Flughafen Zuerich Switzerland 2,048 2, Dual Till Fraport Germany 4,645 5, Dual Till Listed average 5, Source: Bloomberg, broker research The differential in average multiples between transaction and trading is more striking given the close clustering of the multiples within each group The difference in valuation cannot be ascribed to regulatory structure, in theory dual till airports should trade at a premium to single till airports and at a discount to unregulated airports The BAA transaction represented a premium to regulated asset base of 1.24x, that also represents a premium traded multiples in the UK regulated space (1.17x)

10 RARE Infrastructure Performance and return analysis This section compares the performance between listed and unlisted infrastructure assets. We use return data from the Preqin database viii vs returns from the listed infrastructure universe ix. 3.1 Year of vintage universe level returns Our primary measure uses net investor IRR by year of vintage x analysis for unlisted funds and compares with equivalent listed market returns that are adjusted for investment timing xi. Investor IRR to date 30 June 2012 based on year of investment, adjusted for timing of investment Listed infra (RARE 200) Adjusted Adjusted Unlisted infra (ed av Net IRR to LPs) Source: Preqin, Factset, RARE Research As noted in our universe comparison, the unlisted universe comprises a broader range of sectors. We therefore analyse the comparable returns, removing where possible unlisted returns from sector funds outside the RARE listed universe definition. Investor IRR to date 30 June 2012 based on year of investment, adjusted for timing of investment and excluding non infrastructure sectors (by RARE s definition) Listed infra (RARE 200) Adjusted Adjusted Unlisted infra (ed av Net IRR to LPs) Source: Preqin, Factset, RARE Research

11 RARE Infrastructure 11 The underlying data is shown below, along with the comparable correlation and volatility of returns: IRR Achieved to Date 30 June 2012 Vintage Listed Adjusted Unlisted Adjusted Unlisted Adjusted (ex non infra) Listed Unadjusted Unlisted Unadjusted Listed Unadjusted (ex non infra) % 6.8% 7.3% 10.1% 10.2% % 4.4% 10.4% 8.5% 4.7% 1.3% % 3.5% 5.7% 5.1% 4.4% 4.9% % 2.5% 0.9% 2.8% 3.3% % % 3.8% % % 6.9% 11.2% % 4.5% 1.2% 4.2% 4.6% 2.2% 2011* 5.6% 6.3% 3.5% Source: Preqin, Factset, RARE Research * Based on an average of three years for private equity funds to be fully invested, returns for 2011 is likely to be incomplete. RARE notes that vintages pre 2004 have largely been fully distributed and therefore limited return data available to 30 June 2012 Correlation of returns Listed vs Unlisted Standard Deviation Listed Standard Deviation Unlisted Adjusted 57.1% 1.2% 1.4% Unadjusted 29.9% 3.3% 3.2% Source: Preqin, Factset, RARE Research RARE notes the following from this analysis Listed infrastructure, on an adjusted and unadjusted basis, has had superior performance to unlisted infrastructure through all vintages analysed Correlation increases significantly on an adjusted basis highlighting timing of investment a key differentiator when comparing passive listed performance to unlisted returns Unlisted returns and volatility only realisable over a long time period with larger IRR ranges for newer funds still in the investment stage and converging to returns similar to listed in the longer term Currently unlisted performance in 2011 is 6.3% compared to listed of 5.6% (both on an unadjusted basis). This highlights the negative return profile typical of new funds in the Private Equity space

12 RARE Infrastructure Range of unlisted LP IRRs by year of investment The chart below shows the returns of unlisted infrastructure funds by year of vintage, measured to June i.e. for 2006, the weighted average return (net IRR) of all unlisted funds raised that year was 3.5% and the range was +15% to. Range of unlisted fund IRRs by year of vintage Source: Preqin, Factset, RARE Research RARE notes that unlisted infrastructure fund returns display greater variation and volatility over recent years. This is consistent with the sector and maturity analysis indicating greater allocations to riskier assets (Greenfield, competitive assets). 3.3 Sector performance comparison Where data is available for unlisted funds with a sector focus, RARE compares these returns with the comparable listed sector to provide a more accurate benchmark of performance: Toll Road Sector Investor IRR to date 30 June 2012 based on year of investment, adjusted for timing of investment 12.0 Adjusted Unlisted infra (ed av Net IRR to LPs) % 10.4% 8.3% 8.5% 7.7% 7.4% 6.9% % 2.6% Toll Roads Listed Toll Roads Unlisted % % 4.0 Source: Preqin, Factset, RARE Research

13 RARE Infrastructure 13 Oil & Gas Utility Sector Investor IRR to date 30 June 2012 based on year of investment, adjusted for timing of investment % % 9.6% 9.7% 10.7% 8.4% 11.6% 11.3% 9.2% % Oil and Gas Utility Listed 6.0 Oil and Gas Utility Unlisted % Source: Preqin, Factset, RARE Research NB: No unlisted return data in 2005 On a sector basis, we find a similar thematic on performance between listed and unlisted infrastructure and reinforces a couple of key points: Geographical exposure is a key performance differentiator between listed and unlisted sectors. For example, in the toll road sector, the unlisted funds performed significantly lower than listed due to its higher exposure to Europe than its listed peers however performance is more aligned in the Oil & Gas Utility space reflecting similar % exposures to the US Performance between listed and unlisted converges as the fund matures and underlying assets are realised reducing the impact of the private equity structure on performance (as observed in the Oil & Gas Utility sector) There is still limited evidence for an unlisted illiquidity premium in observed returns For more information please contact: RARE Infrastructure invest@rareinfrastructure

14 RARE Infrastructure 14 i For listed investable universe we use the RARE 200 (market capitalization, USD) ii For the unlisted investable universe we use the gross value of infrastructure deals per annum (USD) iii For regional GDP weighting we use the PPP adjusted GDP for each region as a percentage of world GDP iv RARE Sector definitions Community & Social Assets Regulated Assets User Pays Assets Competitive Assets Government Buildings Electric Utilities Airports Gas and Oil E&P Health Services Gas Utilities Communications Power Generation Education Water Utilities Rail Renewable Energy Increasing risk Diversified Utilities Toll Roads Waste Management Transport & Logistics Non Infrastructure Communications Increasing returns v There are 41 sub sector asset classifications between listed and unlisted, hence we have presented the top five as a summary vi There are 41 sub sector asset classifications between listed and unlisted, hence we have presented the top five as a summary vii Transaction data is sourced from Bloomberg, Preqin and publically released information viii Analysis covers 101 unlisted infrastructure funds as of Dec 2012 ix RARE 200 listed universe x Unlisted infrastructure funds (similar to private equity) are often measured on a year of vintage basis (i.e. recording the returns to date from investments in each year). This is because reporting of returns from unlisted funds can significantly deviate from the returns of the underlying investments, often returns are only reported once assets are sold (similar to private equity). This is shown in our analysis of the correlation between unlisted infrastructure funds and private equity, for further information see RARE Listed vs unlisted infrastructure Jan 2012 xi Unadjusted comparison makes no allowance of time to invest (up to three years for unlisted) and for funds which have distributed the majority of capital Important information While the information contained in this document has been prepared with all reasonable care, neither RARE Infrastructure Limited ( RARE ) nor RARE Infrastructure North America Pty Limited ( RINA ) accept any responsibility or liability for any errors, omissions or misstatements however caused. This information is not personal advice. This information has been prepared without taking account of your objectives, financial situation or needs. Investors should be aware that past performance is not indicative of future performance. Returns can be volatile, reflecting rises and falls in the value of underlying investments. Potential investors should seek independent advice as to the suitability of the Fund to their investment needs. The fact that shares in a particular company may have been mentioned should not be interpreted as a recommendation to buy, sell or hold that stock. Any prospective PE ratios and dividend yields or forecasts referred to in this presentation constitute estimates which have been calculated by the RARE Infrastructure investment team based on RARE s investment processes and research. Additional important information for potential or existing investors in United Kingdom RARE is not authorised in the UK under the Financial Services and Markets Act This document and the investment activity to which it relates may only be communicated by an unauthorised person to, and is only directed at: persons having professional experience in matters relating to investments, being investment professional as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) ( FPO ), persons falling within Article 49(2)(a) to (d) of the FPO (including high net worth companies and unincorporated associations) and persons to whom the communication may otherwise lawfully be made, together relevant persons ). This document must not be acted on or relied upon by any persons who are not relevant persons. Any investment or investment activity to which this document relates is available only to relevant persons and will be engage in only with relevant persons. Additional important information for potential or existing investors in Canada RINA is registered with the Ontario Securities Commission as a portfolio manager in the province of Ontario, and in Quebec under MI RINA is not, and is not holding itself out as being, in the business of an adviser except as a portfolio manager in Ontario and Quebec. RARE is not registered under securities legislation in Canada and accordingly is not, and is not holding itself out as being, in the business to advise or deal in securities in Canada. The securities of any investment fund described in the materials enclosed are not qualified for public distribution in any province in Canada and neither RARE nor RINA is registered as a dealer in any province in Canada. Accordingly RARE and RINA are not offering the securities of any investment fund described in the materials in Canada. Prior to making any such securities available to a purchaser in Canada RARE or RINA would have to obtain legal advice as to whether the distribution is permitted and whether registration as a dealer is necessary. Additional important information for potential or existing investors in United States Both RINA and RARE Infrastructure USA, Inc. are registered as investment advisers with the United States Securities and Exchange Commission ( SEC ). Registration as an investment adviser with the SEC does not imply a certain level of skill or training. The information in this presentation has not been approved or verified by the SEC. The information in this presentation is for informational and educational purposes only. This presentation is neither an offer to sell nor a solicitation of an offer to buy units or limited partnership interests in any of the investment funds managed by RINA. An offer can only be made by an offering memorandum for the relevant investment fund and only in jurisdictions in which such an

15 RARE Infrastructure 15 offer would be lawful. The offering memorandum contains important information concerning the risks associated with an investment in the investment funds and must be read carefully before deciding whether to invest in any fund.