[Click eStock] "Macquarie Infra, Attractive for Continuous Dividends and Inflation Hedge"

Samsung Securities Report
Target Price Raised by 5.5%

[Asia Economy Reporter Minji Lee] Samsung Securities maintained a buy rating on Macquarie Infrastructure on the 17th and raised the target price by 5.5% from the previous level to 15,300 KRW. This is based on the judgment that it offers high dividend appeal and can be recognized as a hedging tool in the era of inflation.

Macquarie Infrastructure announced a fourth-quarter dividend per share of 380 KRW. The company's dividend resolutions are made in the second and fourth quarters, and it is common for the dividends in the first and second halves to be the same based on annual performance forecasts. However, this second-half dividend exceeded market expectations by increasing about 2.7% compared to the first half. Researcher Kyungja Lee of Samsung Securities said, “The completed third-quarter capital increase and the inclusion of two city gas assets increased distributable profits,” adding, “The expected dividend yield for this year recorded 5.4% despite the recent strong stock price.”

The stock price of Macquarie Infrastructure has recently shown an upward trend. This is because the 13 road assets in the portfolio have a toll system linked to the inflation rate, and the supply costs of the two recently included city gas retail assets are also linked to the government bond yield through the investment return rate, enabling hedging against inflation.

Additionally, based on the Private Investment in Infrastructure Act, Macquarie Infrastructure can borrow up to 30% of its capital, resulting in a lower debt ratio compared to general companies or REITs, which significantly reduces the burden of rising interest rates and contributes to the stock price strength. Researcher Kyungja Lee said, “The 300 billion KRW corporate bonds currently utilized have maturities in 2023 and 2025 for the 5-year and 7-year bonds respectively, but the weighted average interest rate is 3.09%. Since issuance, interest rates have significantly fallen and recently risen again, so the possibility of higher funding costs at refinancing after 2023 is very low.”

This year’s earnings per share are expected to increase by 4.2% compared to the previous year, showing continuous dividend growth since 2016. Next year’s DPS is estimated to increase by about 6.7% to 800 KRW. This is based on the full reflection of interest income from city gas assets and the earlier-than-expected entry into the dividend phase of assets such as Gwangju Circulation 3-1, demonstrating balanced performance improvements across held assets.

The possibility of additional asset acquisitions in the future is also high. Following the inclusion of four assets last year, the company plans to acquire road assets and renewable energy assets that can increase dividend yields. Researcher Kyungja Lee analyzed, “In the era of inflation, it will stand out not only as a perfect hedge but also as a representative dividend growth stock.”