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Why the Infratil share price could fall on revised earnings guidance

The Infratil Limited (ASX: IFT) share price could be set to plummet in early trade after announcing revised earnings guidance to the ASX this morning.

What did Infratil announce?

Infratil has commissioned independent valuations for several investments held within its International portfolio and announced significant increases in the Draft Valuation Range as at 31 March 2019 for several of the portfolio assets.

These changes included the following:

  • Canberra Data Centres valued at NZ$841 million – NZ$942 million (versus NZ$487.8 million carrying value at 30 September 2018)
  • Longroad Energy valued at NZ$128 million (versus NZ$84.5 million carrying value at 30 September 2018)
  • Tilt Renewables valued at NZ$650 million – $785 million (versus NZ$427.8 million carrying value at 30 September 2018)

In terms of earnings, Infratil advised that its underlying earnings before interest, tax, depreciation, amortisation and other unrealised gains (EBITDAF) for FY19 will be NZ$535 million – NZ$545 million (down from (NZ$580 million – NZ$620 million previously).

Pleasingly for investors, management advised that there would be no change to its dividend guidance for FY19, with the final dividend to be finalised as part of its year-end process and announced on 17 May 2019.

Is Infratil in the buy zone?

The Infratil share price is up 20.6% and has outpaced the S&P/ASX200 Index (ASX: XJO) so far this year. The company’s equity has been buoyed by solid results from Tilt Renewables Ltd (ASX: TLT) and the broader technical environment in regional electricity.

Australian gas and electricity prices remain elevated from supply-side shocks which has boosted returns for Infratil and fellow competitors AGL Energy Ltd (ASX: AGL) and Beach Energy Ltd (ASX: BPT) in 2019.

I would wait until Infratil’s Investor Day on 10 April 2019 to take a better look at the company’s outlook and growth prospects, but in the meantime, this buy-rated stock in a booming industry could be in the buy basket.

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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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