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Investing.com -- Barclays has upgraded its ratings on HICL Infrastructure and International Public Partnerships, citing changes in valuation and outlook detailed in a note dated Wednesday.
HICL Infrastructure was upgraded to “overweight” from “equal weight” rating. Barclays said the move reflects an improvement in valuation following a period of share price weakness.
The brokerage said HICL’s shares were trading at a discount of around 9% to net asset value, compared with a five-year average premium of about 5%.
Barclays stated that the trust’s dividend yield stood at approximately 7.3%, which it described as attractive relative to peers.
The brokerage added that HICL’s portfolio continues to be weighted toward availability-based assets, with inflation-linked cash flows forming a large proportion of revenues.
Barclays said HICL’s dividend cover remains robust, supported by cash generation from its underlying assets.
International Public Partnerships was also upgraded to “overweight” from “equal weight” rating. Barclays said the upgrade was driven by valuation, with INPP shares trading at a discount of roughly 12% to net asset value, compared with a historical average closer to par.
The analysts said INPP’s dividend yield was around 7%. Barclays noted that the company has a high proportion of inflation-linked revenues, which it said provides visibility to cash flows.
The brokerage said INPP’s portfolio includes a significant weighting to availability-based public infrastructure assets. Barclays also highlighted that INPP has limited exposure to demand-based risk relative to some peers, according to the brokerage.
Barclays said both upgrades reflect a reassessment of relative value within the listed infrastructure sector rather than changes to asset quality or portfolio composition.
The brokerage said higher discount rates have weighed on sector valuations more broadly, contributing to wider discounts across infrastructure investment trusts.
Barclays stated that, in its view, the current discounts for HICL and INPP are wider than justified by their fundamentals, based on the data presented in the note.
