Massive growth and further potential

Wednesday, Aug 15 2018 by

I hold and have just topped up in Infrastructure India (LON:IIP).

I made 30% last week (with a smaller holding) and the shares are up massively today.

It seems that this fund is still trading with a massive discount to NAV.

Anyone got further insight into this fund?

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Infrastructure India plc is a closed-ended investment company. The Company's investment objective is to provide shareholders with both capital growth and income by investing in assets in the Indian infrastructure sector, with particular focus on assets and projects related to energy and transport. The Company's portfolio of investments include Distribution Logistics Infrastructure Private Limited, which is a supply chain transportation and container infrastructure company; Western MP Infrastructure & Toll Roads Private Limited, which is an operator of an approximately 125 kilometers toll road in western Madhya Pradesh; India Hydropower Development Company LLC, which develops, owns and operates small hydropower projects; Indian Energy Limited, which is a power producer focused on renewable energy, and Shree Maheshwar Hydel Power Corporation Limited, which is an approximately 400 megawatts hydropower project located on the Narmada River near Maheshwar, Madhya Pradesh. more »

LSE Price
2.5p
Change
 
Mkt Cap (£m)
17.0
P/E (fwd)
n/a
Yield (fwd)
n/a



  Is LON:IIP fundamentally strong or weak? Find out More »


15 Posts on this Thread show/hide all

mmarkkj777 15th Aug '18 1 of 15
1

Hi,

I don't understand why I've got 5 thumbs down on this (with no comments). I only shared a stock that I have done well on??

Am I missing something here?

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Johnny2509 15th Aug '18 2 of 15
3

I’m not familiar with this fund and I doubt many on here will be.

Perhaps you can tell us more about the fund and why you invested? You might then generate a discussion.

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mmarkkj777 15th Aug '18 3 of 15
3

To be completely honest Johnny, I don't know much about it myself.

Its on the Tiny Titans Filter, and I checked the asset value and book value of the company and they were both an order of magnitude above the Mk Cap.
I checked on Hargreaves Lansdown (my broker) and the NAV equates to something above 30p/share, so I bought some last week, got stopped out, then re-bought after making a reasonable profit. They seem to be on the march again (up over 40% today at one point). So I'm hoping they price will go some way to bridging the cap between current price and equilibrium with NAV.

I posted because I thought (as it was on Tiny Titans) that someone on here would be able to shed some more light on why its so undervalued? I thought there might be something negative lurking below the surface that I don't know about , which would obviously affect my continued interest and topping up, if it continues its rise. But if there is nothing negative known, then it could be a really high growth short term position.

However, I'll have to be careful what information I share in future, if its going to get the thumbs down without any comment or explanation. Really don't understand this as most of my other posts have been reasonably well received and discussed. Perhaps I was a bit light on background due to time constraints this earlier. Or maybe people thought I was just trying to ramp (which I don't do here, or anywhere else for that matter).

Anyway, that's my rationale.

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letap73 15th Aug '18 4 of 15
2

In reply to post #390989

I do not know much about the fund - however the Indian stock market has been rising a lot recently, which may explain the rise in the share price.
As the fund deals with an emerging market I can understand why the share value is priced at discount to the NAV. It is not easy to have exposure to the Indian market apart from investment trusts. I for one value your contribution. Hopefully there will be further comments which may suggest alternative means of investing in a rising stock market (although that might be about to change) such as India at the moment.

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Spl183 15th Aug '18 5 of 15
1

Thanks for your post, Mark.

This is one I also follow based on the facts you have presented above. Although you may be aware this stock has a very active board on ADVFN, including a number of daily rampers/ de-rampers seeking short-term gains, and have so far I have been reluctant to buy based on its recent volatility. Means missed out on today’s uplift ! Having said that there are a few bloggers on there with some common sense whom provide helpful insights into their views on this one.

Today’s rise has been significant with no major announcements to indicate why. There is due to be an EGM on 24th Aug so could be investor speculation on what the outturn of that could be ?

I would also welcome any further insights here ?

Thanks

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pka 15th Aug '18 6 of 15
1

Hi Mark,

Thanks for your post.

Like you, I know very little about this closed end fund. I found this highly critical article today about it on the Shareprophets website, although the article was written in 2016 and many people are not fans of the Shareprophets website:

https://www.shareprophets.com/views/23775/infrastructure-india-plc-oink-oink-corporate-piggery-writ-large-on-aim

According to Stockopedia, this fund has a bid-offer spread of about 571 basis points, or about 6% of the current share price, which is much too high for me to consider buying its shares even if I were convinced of its merits as a potential investment.

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mmarkkj777 15th Aug '18 7 of 15
1

In reply to post #391064

Hi PKA,

Thanks for your comment and the link to the Shareprophets piece. Personally, a spread of 6% would be off-putting normally, but this has risen so much as to make it less of an issue.

However, the info. in the link is more enlightening and concerning. After reading this I would definitely not consider them as a buy and hold. £5M (plus) fees to the fund managers seems totally out of proportion for a company of this size, especially if these Indian asset valuations can't be verified easily. I already have funds that cover India and Asia in my pension (with good fund managers), so no need for a long term position.

I was looking for a reason as to why this stock could be so underpriced against NAV, and I can see that this could be it. I'll do some digging tomorrow.

Like them or not, the Tom W and the guys at Shareprophets do uncover some shady practices from time to time. I've read some of their free stuff, but don't have a paid subscription.

However, I will ride this share as an out-and-out trading position with a close stop, as I'm already in.

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ken mitchell 15th Aug '18 8 of 15
5

This might help. Unlike others so far on this thread I've monitored IIP for several years now. Until recent long awaited rescue fund raising, investing in IIP was a definite NO NO ! But it could be that accurate negative news posted here no longer applies.

At long last investors have the fund raising news. But it needs shareholder approval on 24th of August. They should get it, but if they don't the share will almost certainly drop to next to nothing. The share was under 2p ahead of that news but has since been as high as 8p and is currently very volatile and moving on small trades and today was another up day with a 30% or so gain.

I bought some at 4p after the fund raising news but see it as a risky fun punt.

To save time and because probably very few readers here, I've pasted below this a post I did recently on Mike Walters (once Deputy City Editor of Daily Mail) website. Included in it is part of the relevant RNS. (Have also had a quick look at ADVFN bb but it's full or poor quality post and mindless ramping!)


Also note that this is not in any way a standard Investment Trust! They have around 83% in just one investment - DJI. DJI looks promising but has been starved of cash. But the new money raised would change that.

And note that the last NAV update figure was 35p last March. Until they update on that again it's a guess what it is now. But even if way lower than 35p it's likely to be a lot more than current 6p or so shares price.

Here's the text of my post::-

"I've monitored IIP for ages as always at a massive discount to NAV. Have also held in the past at much higher share price and then cut modest lost on bad news.

Finances were dire and though Investment Trusts rarely go bust this one could have done and maybe despite refinancing news this week still could, but that's now far less likely.

Dire finances main reason why share at massive discount to NAV. Mind you NAV has been falling for ages and now down to a supposed 35p.

A rescue fund raising had been expected for ages. As it got delayed so the share price fell to less than 2p before at long long last yesterday was the news they had got it.

Share has doubled on that news and modest Director share buying since it too.

Here is a key bit of the RNS yesterday. Note especially how they own 100% of DLI but that will now reduce and also note how (read 4th paragraph) in worst case scenario they might end up owning none of it!

"The Proposed Financing will see:

· the issue by Distribution and Logistics Infrastructure India ("DLII"), DLI's parent company, of up to 7,500 convertible preference shares in DLII's capital (the "DLII CPS") for an aggregate consideration of up to US$75 million; and

· the sale by the Group of existing ordinary shares in DLII representing 24% of DLII's issued ordinary share capital ("Sale Shares") currently held by the Group for a consideration of US$50 million.

IIP is currently interested in 100% of the share capital of DLI. Following the disposal of the Sale Shares, IIP's interest in DLI will be reduced to 76%. On conversion of the DLII CPS, which will take place based upon an enterprise valuation of DLI at 7.5x EBITDA for the 12 months ending 30 June 2021, IIP's interest in DLI will be reduced to a minimum of 20% and a maximum of 49%.

However, shareholders should note that on conversion of the DLII CPS following of the occurrence of a default under any of the Transaction Documents, IIP's interest in DLI could be reduced to zero.

The net proceeds of issue of the DLII CPS will be used to provide construction and working capital to DLI and the proceeds from the sale of the Sale Shares are intended by the Board to be applied by the Group towards the repayment or partial repayment of existing IIP loan facilities in due course and to provide additional working capital to the Group.

The material agreements entered into in connection with the Proposed Financing (the "Transaction Documents") are described below.

The proposed disposal of the Sale Shares, being existing assets of the Group, is of a sufficient size relative to that of the Group to constitute a disposal resulting in a fundamental change of business pursuant to Rule 15 of the AIM Rules for Companies and, as a result, completion of the Proposed Financing is conditional upon the approval of Shareholders."

So high risk and only worth punting with money we can afford to lose. BUT there is also a fair chance that the share price could now do much better. Even if current massive NAV discount only narrows to 50% and assuming NAV stays around 35p that would mean a share price around 16p and 4 times the current price.

So perhaps worth a punt!"

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mmarkkj777 15th Aug '18 9 of 15

In reply to post #391104

Thanks Ken,

Interesting. So we have the rounded picture now.

I agree. I still think its worth a punt, even if the asset value is less than 35p per share. It surely has to be worth much more than 7p/share. I'm going to hold until 24th Aug.

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Lawman 13th Sep '18 10 of 15

Mark: a look back 4 weeks later.

The price had a massive rise on 03/08, but since has fallen back to well below that.

If you look at a long term chart the price is in a very long term decline.

At best it seems a short term trade to make a quick profit (or loss) but the very high bid/ offer spread is a deterrent.

As a short term trader I suspect you can find far better bets.

Of course it is valid for you to make suggestions for comment.

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mmarkkj777 14th Sep '18 11 of 15

In reply to post #398599

Hi Lawman,

Yes, with the benefit of hindsight I agree entirely. Ken provided the insight and knowledge to demonstrate that the indicated discount to net asset value was not all as it seemed.

I did make a bit of profit on it in 2 short holds.

btw, I'm not really a short term trader. Well over 90% of my investments are in cash, funds and buy and hold positions. However, it addition, I do like to have a dabble trading.

I think this share, with its high volatility, would be one to consider for trading (with extreme care). The spread is a problem though, I agree.

BTW, up 17% again today as I write this.  Will probably be down again by lunch-time!

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andrea34l 14th Sep '18 12 of 15

I got interested in this post and investment based on the name of the trust but the more I read on RNS, replies here, and on the shareprophets page the more I got deterred. They seem to be in a total financial mess, practically every other RNS is about extending the unsecured bridging loan. NAV may be much higher than the share price, but it has dropped by approx 65% since 2010 and the shareprophets commentary makes me suspect that this is still massively inflated. GGIC also effectively owning over 75% of the company seems rather odd.

I see nothing wrong in you mentioning this company, and I hope you don't lose money on it, but it is probably up there with Fastjet in terms of investment potential for me. Good luck!

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ken mitchell 14th Sep '18 13 of 15

In case anyone hasn't followed IIP events closely, this might help.

( Note that until they next update any of us buying IIP are having a blind punt. I've got a small stake bought at 4p and should have sold half when the share price quickly doubled - perhaps small invvestors believing ill informed "will multgi bag" hype on a free investment bb).

1. Last reported 35p NAV is way out of date. It's sure to be much lower now.

2. Their interim results were last December. ( Last year final results were 28th September. So not too long to wait for these... assuming they are on time!)

Note that they said last Decemberthat the weakening rupee was reducing NAV. (Rupee has been very weak recently).

Also they said last December that they would update on "continuing progress at DLI. (That's their key asset that has been swallowing money). afaiaa they have not updated since. If they have please post.

They also said they would update on the Company's other businesses in the periods to come. Again they haven't..

3. There has been one asset sale, for a modest £4 million in late April. They said then "further asset updates in due course." There haven't been any.

4. Bridging loans. These show how they/DLI have been burning huge amounts of money.

i.e Original loan last year was $4 million. Increased to $8 million by June 2017 and $18 million by November 2017 and $23 million by March this year, and $40 million by this June. Now it is $43.4 million BUT it should have been paid off or very soon will be  . They gave a !7th September date. If no news after the 17th then presumably it will come with their results. Don't  rule out delayed results and worst case scenario of "shares suspended pending clarification of financial position." Best not to rule that out if recent fund raising has been insufficient.

Note too that interest rate on the loans was a punitive 12%.

5. There has been no explanation why DLI losing so much money. Nor any indication if or how they will solve it.

So a mass of negatives. BUT BUT there is also a chance that news will be more upbeat soon and now that they have had this rescue fundraising. We should know soon assuming results are on time. Clearly if worst over and NAV 15p or so then there's good upside potential from current 4p. Anyone investing a lot is very very brave as Humphrey used to say to Hacker each time he came up with what he thought was a good idea!

.

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Edinburgh Investor 17th Sep '18 14 of 15
1

Just throwing it out there, a less risky play on this theme could be Severfield (LON:SFR) decent fundamentals, UK based and is quite focused on building partnerships in India. Passes 4 screens, so maybe worth a look.

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mmarkkj777 17th Sep '18 15 of 15

In reply to post #399329

Thanks EI,

I'll take a look.

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