MIDAS SHARE TIPS UPDATE: Gas from landfill makes electricity and profit for 3i Infrastructure
As Thomas Cook travellers wend their weary way back to Britain, they must surely be hoping to return home with minimum fuss and maximum efficiency.
TCR is helping them on their way. The company owns ground support equipment for airports, from steps that allow passengers to leave the plane, to trucks that transport luggage and meals onboard, to buses that ferry tourists to and from the gate.
TCR does not operate this kit. Instead, it leases items to ground handling firms. The business operates in more than 130 airports across the world and is growing fast, particularly since 3i Infrastructure acquired a 46 per cent stake in the firm in 2016.
Midas Share Tips first recommended the shares in 2011, when they were £1.15
3i Infrastructure, known as 3iN, is an infrastructure fund with a difference. Like its peers on the stock market, the group invests in businesses expected to generate steady, predictable profits over the long term.
Unlike most competitors however, 3iN looks for firms with a little more oomph – companies that will not just produce income but also deliver growth. The approach has delivered impressive results.
Midas first recommended the shares in 2011, when they were £1.15. On Friday, they closed at £2.92.
Not only has the share price risen by 150 per cent, but investors have also received ordinary dividends of more than 63p and two special payments totalling 58.4p.
The group is expected to pay 9.2p in the year to March 2020 and brokers believe there is plenty of scope for further strong dividend growth.
3iN is invested in 27 companies, most of which are in the UK and mainland Europe. These include Wireless Infrastructure Group, which owns 2,000 telecom towers across Britain, and Infinis, the UK’s largest generator of electricity from landfill gas.
Methane is a powerful substance – and can be highly polluting when released into the atmosphere.
Infinis turns this gas, found in old landfill sites and disused coal mines, into electricity, enough to power more than a million homes.
There have been two recent acquisitions too – Joulz, a Dutch firm selling gas and electricity meters, as well as cables, transformers and other essential kit, and Ionisos, a French business specialising in cold sterilisation for medical, pharmaceutical and cosmetic products that would be harmed if heated.
3iN does not just buy these firms and wait for the returns to flow. It takes an active interest, often installing fresh management and always taking a seat on the board.
Looking ahead, the group is keen to expand, but only if deals can be found at the right price. The firm is also backed by 3i, which owns a third of the shares.
MIDAS VERDICT: Infrastructure funds are supposed to be a little bit boring. 3iN does not quite fit the mould. The company says that it intends to deliver total shareholder returns of 8 to 10 per cent, including dividends and share price growth.
But management have outperformed that target consistently and a trading statement tomorrow should provide reassurance about the current year. At £2.92, the shares are not cheap but they are certainly worth holding.
If the price dips or the company decides to raise fresh funds on the stock market, that could be a good moment to stash a few away.