Ratio in Infra M&A
What are the first financial ratios you are interested in when you look at a company in infra ? CAPEX margin, cash conversion, conversion before cash ?
Thanks a lot !
What are the first financial ratios you are interested in when you look at a company in infra ? CAPEX margin, cash conversion, conversion before cash ?
Thanks a lot !
Career Resources
What is a capex margin
Capex as a % of revenue
Depends on the exact type of business / situation / project you are looking at —
Given the nature of the sector long-term definite life assets or in some cases effectively perpetual life assets, there is a lot of debt that businesses will take on so key debt metrics (Debt / EBITDA, FFO / Debt, CFO pre-wc / debt) are all frequently looked at.
For utilities the most important trading metric tends to be P/E (due to rate base / regulatory constructs) whereas for for a renewables company, it’s EV / EBITDA
Other industry specific metrics include CAFD yield, lfcf yield, contracted cfs (EBITDA and revs also considered) as a % of total, weighted average contract life remaining, etc…
For non-operating assets, you will spend a lot of time looking at build multiples / payback ratios — in my experience, investors tend to focus on the contracted payback given it provides significantly more certainty for a downside case than when including merchant.
Non-operating projects will also focus a lot on the assumptions around raising debt or tax equity (implied interest rates, DSCRs on a contracted and merchant basis, forecasted capacity factors, etc…).
Realize this is a long-winded answer to a fairly simple question, but the reality is each niche of infra can be slightly different in terms of the key metrics around certain assets / sub-industries. There are plenty of other metrics some people will also look at, but this hopefully gives a good base.
Hey man, I have some questions about infra banking vs project finance, any chance you can shoot me a PM ?
Quasi expedita consequuntur et. Expedita ut est quod aut.
Pariatur aut aut blanditiis sit in. Deserunt illo eos et eveniet tenetur recusandae quo. Animi et perferendis quis aut doloremque magnam. Voluptas a cupiditate veritatis ab aliquid vel quo hic. Non tempore ducimus reprehenderit et.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...