Stewart Investors manage investment portfolios on behalf of our clients over the long term and have held shares in some companies for over 20 years. They launched their first investment strategy in 1988.
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A monthly review and outlook of the Global Listed Infrastructure sector.
Market review - as at February 2025
Global Listed Infrastructure gained in February on the appeal of its stable, defensive characteristics. The best performing infrastructure sector was Towers / Data Centres (+8%), aided by healthy December quarter earnings numbers and lower bond yields. Demand levels for digital connectivity remain healthy, and relatively immune to an uncertain economic and geopolitical backdrop.
The worst performing infrastructure sector was Airports (-3%). Airports of Thailand (-22%, not held) fell on concerns for the financial position of concessionaire King Power, which operates many of the duty-free shops at Thailand’s airports.
The best performing infrastructure region was the United States (+4%), reflecting strong returns from its tower and utility stocks. The worst performing infrastructure region was Asia ex-Japan (-4%), owing to weakness from the region’s airports and ports.
Fund performance
The Fund returned +0.6% after fees in February1 , -88 basis points behind the FTSE Global Core Infrastructure 50/50 TR Index (SGD).
The best performing stock in the portfolio was regulated utility Exelon (+12%), which operates and maintains electricity transmission and distribution networks across the eastern half of the United States. The stock gained strongly after the company announced better-than-expected December quarter earnings numbers, accompanied by positive 2025 earnings guidance. The company also increased its 2025–2028 capex plan from US$34.5 billion to US$38 billion, primarily as a result of greater investment into its transmission networks. Typically, regulated US utilities are allowed – via customer bills – to claim back and earn a reasonable return on money spent in this way. Higher capex spend by regulated utilities can therefore lead to earnings growth over time.
The appeal of defensive, domestically focused assets, along with a broadly favourable environment for capex and rate base growth, proved supportive to a number of other large-cap, regulated US utilities including Eversource Energy (+9%), American Electric Power (9%), Evergy (+7%) and Xcel Energy (+7%). Pennsylvania-based utility and energy midstream business UGI Corp (+11%) climbed after reiterating its determination to improve its underperforming US propane distribution business, AmeriGas. The company’s CEO recently noted the firm’s intentions to “significantly enhance … business processes, commercial practices, and service quality”.
US tower company American Tower (+11%) rose after announcing healthy December quarter earnings numbers, supported by robust tower leasing demand and double-digit revenue growth from its data centre business segment. Robust December quarter earnings, lower bond yields and positive industry dynamics also proved supportive of smaller peer SBA Communications (+10%).
The worst performing stock in the portfolio was Japan Airport Terminal (-11%), which owns and operates the terminal buildings at Tokyo’s Haneda Airport. The stock appeared to decline in sympathy with the broader Japanese market, which ended the month lower, rather than as a result of stock specific developments. December quarter earnings were in line with expectations, with higher costs offset by strong international passenger spending rates at the airport. The operating environment appears supportive; data from the Japan National Tourism Organization showed that Japan received 3.8 million overseas visitors in January – a record high for any single month. Beijing Airport (-3%) also underperformed as a higher-than-expected increase in tax expenses weighed on the company’s full year earnings. Persistent concerns around Chinese economic weakness represented an additional headwind to the stock.
Natural gas-focused energy midstream company DT Midstream (-5%) underperformed as lower-than-expected December quarter earnings numbers were accompanied by relatively conservative 2025 guidance comments from the management team. Over the longer term, the company remains well positioned to benefit from favourable demand dynamics, as awareness of the key role that natural gas will play in meeting future energy needs continues to grow.
US east coast freight rail stocks Norfolk Southern (-3%) and CSX Corp (-2%) underperformed on concerns for volume softness, following adverse weather conditions in recent weeks. Sentiment towards these stocks was also affected by concerns that the imposition of US tariffs on China, Mexico and Canada – the United States’ largest trading partners – could affect demand. West Coast operator Union Pacific (flat) fared better on relatively robust volume metrics and a disciplined approach to costs.
1 Fund performance is based on the Singapore unit trust, net of fees, expressed in SGD terms. All stock and sector performance data expressed in local currency terms. Source: Bloomberg.
Fund activity
A position was initiated in China Tower, a mobile tower company established in 2014 when the tower businesses of China’s largest telecom companies – China Mobile, China Unicom and China Telecom – were merged to form a new stand-alone business. China Tower has a defensive balance sheet, pays a ~7% dividend yield and currently trades on modest valuation multiples. A dominant market position – China Tower has 97% of the country’s mobile towers – gives the company very strong barriers to entry, making it well positioned to benefit from further investment into the country’s mobile networks.
Canadian freight rail operator Canadian Pacific Kansas City was also added to the portfolio. CPKC operates a 20,000-mile rail network that – uniquely amongst peers – connects Canada, the US and Mexico. The company has a track record of delivering market-leading earnings growth and is run by an experienced and well-regarded management team. Recent uncertainty around an aggressive US trade agenda, notably the imposition of tariffs on Canada and Mexico, has seen the stock underperform peers. This provided an opportunity to build a position in this high-quality company and its long-life assets at appealing levels.
Market outlook and fund positioning
The Fund invests in a range of listed infrastructure assets including toll roads, airports, railroads, utilities and renewables, energy midstream, wireless towers and data centres. These sectors share common characteristics, like barriers to entry and pricing power, which can provide investors with inflation-protected income and strong capital growth over the medium-term.
The early weeks of the Trump administration have been characterized by volatility and uncertainty, which appears to have unsettled financial markets. We believe that its regulated or contracted earnings streams, long-term structural growth themes and essential service nature should help to insulate the global listed infrastructure asset class from these concerns.
For example, we remain optimistic about the substantial investment opportunities facing utility stocks. These stocks face higher capital expenditure needs to meet the increases in electricity demand being driven by AI, data centres, manufacturing onshoring and electrification, particularly in the US. They are likely to need to raise substantial amounts of equity in 2025 to meet these needs. However, this theme should also enable the sector’s Earnings per Share growth rate to accelerate from a typical range of between 3% and 5% per annum to between 5% and 8% per annum, representing a meaningful positive shift.
This rising demand is also likely to bolster the need for natural gas, which has a crucial role to play in maintaining energy reliability and affordability. As well as benefitting utilities, this is also likely to drive additional demand for North American energy storage and transportation assets, giving energy midstream companies new opportunities to invest and grow.
Digitalisation is another key theme for the asset class. We expect structural growth in demand for mobile data (underpinned by an ever-growing reliance on digital connectivity) to support longterm earnings growth for Towers. The adoption of 5G technology over coming years will require networks to handle increased data speed, as well as a much higher number of connected devices. The surge of interest in AI is driving data center demand, as well as boosting the need for electricity.
Source : Company data, First Sentier Investors, as of 28 February 2025.
Global Listed Infrastructure
Infrastructure powers the world we live in – and when it comes to on-the-ground research, our team can be found on site
Investing in global listed infrastructure can offer inflation-protected income and steady capital growth from real assets delivering essential services. We search for best-in-class assets worldwide with high barriers to entry, structural growth and pricing power.
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