Spark Infrastructure (SKI)

By Jason Fittler

SPARK is the CKI/Reef-managed infrastructure vehicle.

The group’s current assets include 49% interests in Victorian electricity networks Powercor and CitiPower, and in South Australian electricity network, ETSA.

SPARK’s objective is to invest in regulated utility infrastructure, both within Australia and overseas. This includes electricity, gas distribution and transmission, regulated water, and sewerage assets, which offer relatively low risk and stable cash flows. This facilitates the payment of relatively predictable distributions to investors and offers the potential for long-term capital growth.

SKI reported a solid interim result, underpinned by steady organic growth and a good performance from unregulated services. SKI continues to exert financial discipline, and we believe funding concerns are overdone.

However, we do concede that the stock is facing some headwinds at the moment. With the market bracing itself for roughly 150-200bp of rate hikes over the next year, market sentiment towards geared defensives like SKI has turned negative.

Throw in uncertainties around funding of capex, and there’s another excuse for investors to stay away. But if the company maintains its discipline, we think it will win back the market’s favour. With CKI also on the acquisition trail, we believe SKI.s 18% FCF yield is one best value acquisitions out there.

The stock is paying a 12% yield with a forecast for this to increase to 13% by 2011.

If you are looking for good blue chip shares paying high dividends (and you should be) make sure you add this to your portfolio. The stock has recently gone ex-dividend making it cheap right now.

By the way you should also see 20% growth in the stock as well.

What more could you want!

For more information on Spark Infrastructure (SKI) please call us on 07 4771 4577.