Okay. Our third stock for today is Atlas Arteria. Jun Bei, why can this stock benefit from rising rates and is it a buy, hold, or sell?This is more of a hold. It benefits and it also is hurt by rising interest rates. So let’s explore the benefit first. In its contract, its toll prices are actually linked to inflation, so as inflation goes up, its revenue goes up. That’s one side. So in terms of revenue, it’s linked directly to higher inflation numbers.
Now, the challenge is, like any infrastructure asset, they borrow a lot of debt and then that debt is used to fund those assets. Now, those debts are very sensitive to rising interest rates. Of course, they hedged these out a little bit. But as rates go higher, when they need to roll their debt, it actually hurts their margin.
So net-net, I would say this company is more neutral in terms of whether it’s a beneficiary or not. But I would put this company as a hold, just because it’s experiencing that reopening of toll roads in regions where lockdowns have been very prolonged.It’s been a pretty volatile ride for Atlas Arteria shareholders in 2022, but now, its share price is down around 2 per cent. Ben, is it a buy, hold, or sell?I’m going to go a buy on this one, Ally. We own it.
The only question I’ve got on it is that the duration of the concession in France is starting to look a little bit skinny. They need to try and push that out. I think that might be causing a bit of investor hesitancy, but it’s on a yield of nearly 7 per cent. So it looks pretty attractive.Well, we asked our guests to bring along one stock that surprisingly benefits from rising rates today.