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Levered.
Infra investors generally look at levered return as the key valuation metric.
Would a valid explanation also be that they usually take on a lot of debt to fund their infrastructure (highways) and so interest expense may be a large number that should definitely be factored into the calculations for FCF. (as well as the large amount of debt obligations from borrowings)
Levered. I actually look at effective distributions to equity holders (DDM) to account for cash traps, especially in a no-exit scenario (hold until concession expires).
In an exit scenario, when looking at the re-buyer IRR, this might be overly conservative since the asset might be more valuable in the hands of a potential buyer that might have a solution to that issue.
@nutry Would a valid explanation also be that they usually take on a lot of debt to fund their infrastructure (highways) and so interest expense may be a large number that should definitely be factored into the calculations for FCF. (as well as the large amount of debt obligations from borrowings)
Partially yes, but I insist that focusing on distributions is more important given timing of dividend recaps/capital reductions are critical to returns. For that, you need to analyze FCFE. This is even more pronounced if you are looking at a greenfield highway project.
Levered, when valuing a toll road/highway which are highly levered you are likely going to have to take on the debt or do a refi so the FCF and valuation is post interest expense
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