RCS - Sequoia Econ Infra - Results analysis from Kepler Trust Intelligence

Sequoia Economic Infrastructure Income FundAnnouncement

01/12/2025 11:30

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RNS Number : 7053J  Sequoia Economic Infra Inc Fd Ld  01 December 2025

Sequoia Economic Infrastructure Income (SEQI)

01/12/2025

Results analysis from Kepler Trust Intelligence

Sequoia Economic Infrastructure Income (SEQI) has reported strong results for
the half year ending 30/09/2025. The NAV total return when annualised was
10.1%, well in excess of the targeted gross portfolio return of 8-9%.  The
NAV per share itself was up 1.2% to 93.67p, and dividends of 3.44p were paid
or declared, consistent with the full year target of 6.875p. These dividends
are fully cash covered and as of 27/11/2025 the prospective yield on the
shares was 8.6%. Meanwhile, there is pull-to-par upside of 3.1p per share
within the current portfolio valuation. Share price total returns were 7.7%;
despite dividends delivering a high share price yield, the price itself fell
slightly from 78.3p to 77.9p as the discount widened from 15.4% to 16.8%.
 The management team have continued to invest in new loans at highly
attractive rates, recycling £213m into new investments at a weighted average
yield-to-maturity of 8.9%. One shift has been to reduce the weighting to the
US in the light of policy uncertainty on renewables and tariffs. New loans
have been made in the EU and the UK instead. Meanwhile, exposure to data
centres has come down as the team react to weakening covenants in a crowded
trade and look to reallocate to areas more attractive on a risk/reward basis.

 

 

Kepler View

Sequoia Economic Infrastructure Income's (SEQI) portfolio of conservatively
managed infrastructure loans looks like an attractive source of yield in the
current environment. With economic risks front and centre, we think a
portfolio mostly invested in senior secured loans (57%) and in non-cyclical
but economically-vital sectors looks likely to prove resilient. Looking
forward, the huge demand for infrastructure in a low growth world is not
currently being satisfied by the supply of capital, creating a strong
technical picture for an investment via a specialist-managed portfolio with
the scale to participate in large projects while being highly diversified
across assets, industries and themes.

We think the portfolio is benefitting from the relatively short maturity of
the loans the team make, with the current weighted average life being just 3.2
years. Lending at shorter maturities has allowed agility in portfolio
positioning. As well as the geographical move from the US to Europe, it has
facilitated first entry into the data centre market, and more recently a
dialling back of exposure as investors crowd in. The team highlight the
weakening of covenants as the key to their decision to reduce exposure to data
centres during the AI craze, which speaks to the defensiveness of approach
which we think should appeal to income investors looking to invest in the
private debt markets.

Falling base rates present a challenge, but with a high proportion of
investments fixed rate or hedged and the team reporting spreads remaining at
healthy levels, the outlook for the dividend looks stable to us, particularly
when considering the uninvested cash and gearing, and the spend on buybacks
which could be redirected. For new investors we think the 16% discount adds to
the attractions, boosting the dividend yield and providing scope for a capital
return over time on top of the pull-to-par effect in the NAV which is expected
to deliver a gain to NAV of 3.1p by 2028.

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