Europe’s Digital Landlord

There is a particular kind of quality business we like. It’s one that owns an irreplaceable physical asset and uses it to generate healthy cash flows on long-term contracts, with a built-in ability to pass through inflation. Examples include things like railways, airports, pipelines, royalty companies, motorway concessions, and more.

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Today’s note recommends such a company, and it’s one that has reached a powerful inflection point. This is a moment that doesn’t come along often: a high-quality, monopoly-style infrastructure asset where the heavy lifting has been done, and the capital allocation regime has changed from building an asset base to reaping the cash flows from it. The shares trade roughly where they did in 2017, when the company had a third of the assets and a tenth of the contracted backlog.

What’s more, investors aren’t seeing the shift, so it is sitting at attractive levels. During the transition from growth company to cash flow machine, investors endured two years of no growth and no shareholder returns. Now, the transition is complete, and the future is bright.

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