Very Interesting POV from UBS....Hit the roads, UBS tells...

Very Interesting POV from UBS....

Hit the roads, UBS tells clients
Kevin Andrusiak
October 05, 2006
UBS Wealth Management has told its high net worth clients to home in on infrastructure stocks because forecast returns looked more attractive and the evolution of the market was five year's behind that of real estate investment trusts.
UBS's executive director and co-head of global infrastructure and utilities research, Craig Stafford, told a meeting of major UBS clients in Sydney yesterday that infrastructure and utility stocks would create a new asset class along the lines of equities and government bonds.

Their monopoly characteristics were ripe for yield growth in a slowing market.

Mr Stafford said there was a trend globally to focus on infrastructure plays as governments warmed to the idea of privatising assets in favour of spending the money elsewhere.

Over the past 10 years, infrastructure and utilities stocks have outperformed the S&P/ASX 200 and the S&P/ASX 200 Real Estate index.

"The sector is gaining quite dramatically," Mr Stafford said.

"There is $20 trillion of infrastructure and utility assets globally and only 10 per cent of that is securitised. Why do we like infrastructure assets? They have monopoly characteristics and they have attractive yield and growth."

UBS researchers favour infrastructure stocks over utilities and have buy recommendations on Transurban, BABC___OCK & Brown Infrastructure, Macquarie Infrastructure Group, Australian Infrastructure Fund and Macquarie Communications Infrastructure Group - favouring the first two.

Mr Stafford said he preferred toll roads rather than airports in times of rising oil prices and spin-offs like MIG needed to concentrate on share price growth and perhaps slow acquisitions.

"I think motorists would rather pay a toll than sit in a car for 15 minutes in traffic burning fuel," he said.

"Since the equity market peak of mid-May, investors have rotated both globally and locally to three sectors, real estate investment trusts, utilities and consumer staples. We believe all three look somewhat stretched.

"We have two key recommendations. Overweight infrastructure, as it is cheaper than listed property trusts and utilities, and overweight defensive growth."