International Public Partnerships (INPP ) has doubled its share buyback programme to £60m and extended it until next March as the core infrastructure fund looks to convince investors the 17% discount to net asset value (NAV) at which its shares trade is excessive.

Having released £235m through asset sales over the last 18 months and repaid its debts, the £2.9bn Guernsey investment company has pledged to continue, saying disposals at asset value validate the NAV and provide cash for buying back its undervalued shares.

Buybacks of cheap stock give a small boost to NAV and, with the 8.37p per share annual dividends included, lift shareholders’ total returns to 9.3%.

‘We think that’s a very attractive 4.6% premium compared to a 30-year UK government bond’s yield to maturity,’ said Chris Morgan (pictured), investment director at fund manager Amber Infrastructure.

In a reflection of the robustness of these cashflows from the global transport, education and energy portfolio, the board announced the twice-yearly dividend will go quarterly from next year to provide shareholders with more regular income.

The board also reiterated a full-year dividend target of 8.37p, up 3% on last year, which it expects to be covered 1.1 times. The shares yield 6.6%.

Net asset value softened 2% to 149.5p per share in the half year to 30 June, reflecting a 30-basis point (0.3%) increase in the weighted average valuation discount rate to 8.7%, which surprised some analysts.

Morgan explained this was a conservative figure and that although last month’s cut in interest rates was helpful, the rise in the discount rate also reflected less liquidity in the market.

‘There are signs that that is improving, with fundraising for infrastructure strategies up year-on-year over the first half, while the allocation to infrastructure from institutional investors is up too. Transactions that are happening are relatively small in size though,’ he said.

In August, the fund raised £14m selling its investment in the Three Shires portfolio of four UK community healthcare facilities.

Morgan noted that assets earmarked for divestment did not impact the fund’s key credentials, such as 0.7% inflation linkage, portfolio maturity and cashflows, too heavily.

In the six-month period £85m was invested in projects that cleared the higher rate of return hurdle introduced earlier this year, including the Moray East offshore transmission owner, Flinders University health and medical research buildings, Gold Coast Light Rail and broadband business Toob.

It is difficult to sell an asset at a premium valuation in the current sellers’ market, but Morgan noted that Amber was seeing lots of good opportunities, such as German rail leasing company Benex, which makes up 2.5% of the INPP portfolio. The company agreed to invest a further £15m in the business post-period end.

The largest individual holdings remain UK gas distributor Cadent, which saw its position drop from 16.2% to 16%, and Tideway, the builder of London’s ‘super sewer’, which slippped from 14.3% to 14.1% of the portfolio.

The shares jumped 2% to 130.2p today, putting them on a 13% discount to the June NAV. Morgan said that more confidence about the timeline of interest rate cuts over the coming months could be supportive of the shares.

Over five years to 31 August, the trust delivered underlying returns of 30% while the shares fell 1% and the FTSE All Share index returned 38%, according to Morningstar data.

Jefferies analyst Matt Hose said that while the marginally higher discount rate on the back of transaction activity was slightly surprising, the bulk of the results were as expected.

‘The extended share buyback programme is an additional positive, given the small size of the initial allocation, particularly if it is funded with further disposal activity,’ he said, maintaining a ‘hold’ recommendation.

Investec’s Alan Brierley was encouraged by the operational performance of the company and approach to capital allocation. ‘We remain comfortable with our “Buy” recommendation,’ he said.