‘Reassuringly low surprise’: Why WAM is buying DBI after its result

There weren’t many surprises in Dalrymple Bay Infrastructure's (ASX: DBI) latest result. For Wilson Asset Management's Hailey Kim, that is exactly what investors should want from a defensive infrastructure holding.

Terminal Infrastructure Charge (TIC) revenue increased 3.6% to $156.5 million, while EBITDA rose 4.7% to $150.5 million, around 1% below market estimates. Statutory NPAT increased 14.2% to $49.2 million and funds from operations rose 10.2% to $92.7 million.

DBI also reaffirmed distribution guidance of 28.62 cents per security for tariff year (TY) 26/27, representing growth of 8.5%, and maintained its longer-term target of 3% to 7% annual distribution growth.

Around $370.6 million of committed non-expansionary capital expenditure, or NECAP, is still to be added to the asset base. Shiploader 1A and Reclaimer 4 are scheduled for commissioning by the end of 2026, with most of the committed spend expected to enter the NECAP asset base by 1 July 2027.

Kim rates DBI a BUY, describing it as the “defensive lever” in WAM’s portfolio.

“Its 100% take-or-pay contracts (which require customers to pay for contracted capacity whether they use it or not – ed.) CPI-linked pricing and regulated return on approved capital expenditure provide a level of earnings certainty that is difficult to find elsewhere in the market.”

Key Results TY26

• Terminal Infrastructure Charge (TIC) revenue up 3.6% to $156.5m
• EBITDA up 4.7% to $150.5m vs $151.4m ests (1% miss)
• Statutory NPAT up 14.2% to $49.2m
• FFO up 10.2% to $92.7m
• Q2-26 distribution of 6.75 cps, taking the half to 13.50 cps, in line with ests
• Net debt up 1.9% to $2,012.3m since 31 December, with investment grade rating reaffirmed
• TY-26/27 distribution guidance of 28.62 cps reflects 8.5% growth, with a 3% to 7% p.a. DPS growth target maintained
• Committed NECAP projects of $370.6m still to be added to the asset base, with Shiploader 1A and Reclaimer 4 on schedule for commissioning by end-2026
• Most of that spend should hit the NECAP asset base by 1 July 2027, driving a material uplift in TIC revenue from that point

Do you currently hold DBI and what is your rating?

BUY

DBI is the defensive lever in our portfolio, giving us solid yield underpinned by highly visible cash flows, alongside genuine growth optionality.

Its 100% take-or-pay contracts, CPI-linked pricing and regulated return on approved capital expenditure provide a level of earnings certainty that is difficult to find elsewhere in the market.

What matters from the results?

It was a reassuringly low-surprise result in what is otherwise a volatile reporting season. The distribution was in line with expectations and DBI reaffirmed its guidance, which was upgraded at its May AGM.

The company also continues to add to its growth pipeline.

Around $370 million of committed capital projects remain to be added to the non-expansionary capital expenditure asset base, which should deliver around a 53 cent per tonne uplift to the Terminal Infrastructure Charge by the middle of next year.

Management also flagged a new $39 million Series Z program on top of that, which is a modest extra kicker to TIC.

Every 10 cents of TIC uplift adds around $8.5 million of annual revenue, so that pipeline is doing a lot of the heavy lifting on the medium-term growth story.

How do those outcomes affect the outlook?

NECAP remains the key driver of DBI’s medium-term growth story.

This is particularly attractive growth because approved capital expenditure earns a regulated return and is recovered through the Terminal Infrastructure Charge.

The growing project pipeline provides increasing visibility around earnings growth beyond the current guidance period, while the potential 8X expansion remains an additional longer-term option.

What should investors be paying attention to as the story unfolds?

The key milestones are delivery of SL1A and RL4 on time and on budget, continued additions to the NECAP pipeline, and progress on the 8X expansion opportunity.

Investors should also watch for opportunities to optimise existing terminal capacity or diversify into assets with a similar risk profile.

What could you be wrong about?

Despite its defensive cash flows and long-dated debt profile, DBI is often treated by the market as a bond proxy. That means the share price can remain sensitive to movements in bond yields, even where changes in rates have little immediate impact on underlying earnings.

While our base case is that rates have peaked and will begin to decline next year, there remains a possibility of further rate volatility in the near term.

This could create periods of share price dislocation, which we would view as a potential opportunity to add.