The Q4 2021 release of the EDHECinfra indices incorporates the views and asset-level revenue forecasts of our team of financial analysts. This report updates the Q3 2021 report and is presented following the TICCS® taxonomy of infrastructure companies TICCS® taxonomy of infrastructure companies. Each quarter, the team reviews the revenue forecasts of 650 companies that currently live in the EDHECinfra universe, based on the latest reports, historical data, sector knowledge and contributed data.

by Jack Lee and the team

Overview: we have downgraded more cash flow projections in the wake of the continued impact of Covid-19

Despite progress with the development and provision of Covid-19 vaccines, there is still little clarity on the evolution of lockdown restrictions in most of the 25 countries in the EDHECinfra universe. Towards the end of the quarter, the new  Omicron variant caused many of these countries to tighten their restrictions once again. On this basis, we expected the future revenues of infrastructure companies to remain depressed for the next 12-36 months.

Given widespread global inflation, we have also adjusted our forecasts to incorporate this inflation spike, which we expect to be temporary.

That said, the majority of the forecasts we made in Q3 2021 remain applicable, with the exception of those of the sectors highlighted below:

This quarter, we expect to further lower some of our revenue projections from previous levels. Industry-wide revenue passenger-kilometres (RPKs) were down 49.4% from their October 2019 values (IATA, 2021a). While negative, this is an improvement on previous quarters, which were down more than 60% from pre-Covid levels. Although global air travel continued to slowly recover in October, the emergence of the Omicron variant is likely to negatively impact this recovery.

The recovery of domestic and international markets depends on future restrictions, vaccination rates, and the risk-aversion of passengers (IATA, 2021b). We expect a gradual recovery in travel demand, but with numbers not returning to pre-Covid level until 2023.

IC6010 Airport Companies

This quarter, we expect to further lower some of our revenue projections from previous levels. Industry-wide revenue passenger-kilometres (RPKs) were down 49.4% from their October 2019 values (IATA, 2021a). While negative, this is an improvement on previous quarters, which were down more than 60% from pre-Covid levels. Although global air travel continued to slowly recover in October, the emergence of the Omicron variant is likely to negatively impact this recovery.

The recovery of domestic and international markets depends on future restrictions, vaccination rates, and the risk-aversion of passengers (IATA, 2021b). We expect a gradual recovery in travel demand, but with numbers not returning to pre-Covid level until 2023.

IC6050 Road Companies

In Europe, the Philippines, the US and South America, we have revised our revenue forecasts slightly upwards, seeing a recovery of 5-10% for most companies from Q3 2021. This improvement is mainly due to easing traffic restrictions towards the end of the year. However, the degree of easing differs by region. Local governments have also provided subsidies to the companies.

In Malaysia, revenue is expected to recover by as much as 55% in 2021 and 30% in 2022 compared with Q3 2021. With the further easing of movement restrictions, traffic has recovered significantly and is near pre-Covid levels.

In Australia, due to the significant easing of traffic restrictions in Q4 2021, revenue is expected to recover by 20-25% in Victoria and 30-45% in the rest of the country in 2021. A 5-15% increase is also expected in 2022.

Our Q4 2021 revenue projections for other sectors are unchanged from our Q3 2021 assessment. 

As before, the most impacted segments are merchant (BR-20) and regulated (BR-30) companies. In the absence of long-term revenue contracts, these investments are susceptible to the impact of external events. By contrast, contracted business models (BR-10), have been far more robust in the face of the impact of Covid-19 on cash flows.

As of this quarter, companies in all geo-economic segments (TICCS Pillar 4) are included in our revision of the revenue forecast due to Covid-19, as the pandemic has spread.

The following table lists those industrial sectors that we consider to be experiencing the most material impact:

References

• IATA (2021a). Air Passenger Market Analysis Oct 2021. https://www.iata.org/en/iata-repository/publications/economic-reports/air-passenger-monthly-analysis—october-2021/
• IATA (2021b). An almost full recovery of air travel in prospect. https://www.iata.org/en/iata-repository/publications/economic-reports/an-almost-full-recovery-of-air-travel-in-prospect/