Macquarie Korea Infrastructure (088980) Q3 2024 earnings summary

Executive summary

• Established in 2002 and listed in 2006, the fund invests exclusively in Korean infrastructure, with a market capitalization of KRW ~5.1 trillion as of September 2024 and a 2023 distribution yield of ~6.2%.

• The portfolio comprises 20 assets: 14 roads, 1 port, 1 rail, 3 city gas, and 1 digital, with KRW 3.1 trillion invested as of September 2024.

• The fund is managed by Macquarie Korea Asset Management and is exempt from corporate tax if it distributes at least 90% of earnings.

• Weighted average traffic volume across 13 toll road assets grew 2.6%, but traffic revenue declined 1.9% due to toll reductions, with compensation provided by authorities.

• BNCT container port saw a 2.6% drop in volume and 6.1% drop in revenue for the quarter, with EBITDA down 16.6% due to economic slowdown, competition, and geopolitical tensions.

Financial highlights

• 3Q 2024 revenue was KRW 74.4 billion (down 2.2% YoY); net income was KRW 54.6 billion (down 6.8% YoY), mainly due to lower revenue from amended BNCT loan terms and higher interest expense from new debt.

• For the nine months ended September 2024, revenue rose 2.9% YoY to KRW 331.8 billion and net income increased 2.1% YoY to KRW 276.0 billion, driven by higher dividend income.

• Interest income declined due to changes in the BNCT subordinated loan agreement effective July 2024.

• Dividend income increased in the quarter, partially offsetting lower interest income.

• 2024 first half distribution was KRW 380 per share (KRW 165.6 billion total), paid in August 2024.

Outlook and guidance

• The fund continues to seek diverse investment opportunities, with recent focus on digital infrastructure and city gas.

• Management highlights ongoing macroeconomic and geopolitical risks impacting port and toll road assets.

• The amendment to BNCT's subordinated loan agreement introduces a variable interest rate (6–12% p.a.) based on BNCT's performance and liquidity, reflecting a cautious outlook amid economic and competitive pressures.

• The Hanam Data Center acquisition is expected to support future growth, with completion of mechanical, electrical, and plumbing works anticipated by June 2025.