Fortress Transportation And Infrastructure Investors Benefiting From Improving Energy Markets And Growing Asset Deployment

Hindsight being what it is, Fortress Investment Group may wish they had waited a little bit to take Fortress Transportation and Infrastructure (FTAI) public. Energy infrastructure was supposed to be a significant part of this infrastructure fund’s focus, but the company hit the market just in time to see other energy companies dive into their bunkers during the sharp downturn in the energy market. That has complicated the company’s asset deployment/investment plans, but investment is starting to return to the energy markets and FTAI has managed to build up its aviation leasing business in the meantime.

These shares are up about 50% from when I last wrote about them, as investors have turned more bullish on the prospects for deploying capital into markets like energy and as FTAI has put capital to play into assets that are starting to help support the dividend. With that move, the shares are no longer significantly undervalued, but they do offer some modest upside and a dividend yield above 7% that should be supported by funds available for distribution by year-end.

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Fortress Transportation And Infrastructure Investors Benefiting From Improving Energy Markets And Growing Asset Deployment

With Fortress Transportation, It's About The Finish Not The Start

Fortress Transportation and Infrastructure Investors LLC (NYSE:FTAI) continues to be an exercise in patience and frustration for shareholders. The idea here is sound, invest attractively-priced capital into a variety of infrastructure projects that throw off cash flows that can be returned to shareholders later on as dividends. While that sounds great and companies like Brookfield Infrastructure Partners (NYSE:BIP), Macquarie Infrastructure (NYSE:MIC) and numerous midstream energy companies have used this basic outline successfully, companies have to actually invest and acquire assets for the model to work.

I will immediately acknowledge that it's important for FTAI management to acquire the right assets and not just acquire whatever assets it can right now. Still, expectations for distributable cash flow have plunged over the last 18 months as the company has been much slower to expand the assets under management than expected. I believe these shares are still undervalued on the basis of what the company has done with its aviation leasing business and what it is in process with at Jefferson and Repauno, but this is really only suitable for aggressive investors who have the patience to sit tight during this protracted ramp-up period.

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With Fortress Transportation, It's About The Finish Not The Start

Seeking Alpha: Sluggish Investments And Changing Markets Have Hammered FTAI

Back in the summer of 2015, Fortress Transportation and Infrastructure (NYSE:FTAI) looked like an interesting new opportunity in the infrastructure investment space to go alongside more established names like Brookfield Asset Management (NYSE:BAM) and Macquarie Infrastructure (NYSE:MIC). Although there was the noted risk of the difficulty of making cash flow projections based on little more than uncommitted capital and management intentions, there appeared to be attractive opportunities in areas like aviation leasing, port development, and terminal operations.

Unfortunately, those initial projections proved much too generous, and the shares have lost about 40% of their value. Management has moved much slower than I'd anticipated in investing/deploying capital, and the company has seen sentiment around terminal operations shift dramatically in the wake of the severe drop in oil prices and the subsequent slowdown in U.S. onshore production. Now the company finds itself in a position where the distributable funds generated from operations may not fund its dividend in 2016 unless those investments accelerate.

I understand why the market has turned on this name, and I can certainly appreciate less risk-tolerant investors taking the position that this is untouchable until the company makes some meaningful use of that nearly $900 million in investable funds. That said, for more aggressive investors, this could still be an interesting opportunity with both a capital gains and income aspect.

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Sluggish Investments And Changing Markets Have Hammered FTAI

Seeking Alpha: Fortress T & I : One Of The Newest Infrastructure Options

Infrastructure investing is a reasonably hot space now, and one of the end results is more investment options for the regular investor. Fortress Transportation and Infrastructure (NYSE:FTAI) isn't a brand new company, and the investment team behind is most definitely not new to infrastructure investing, but it is a newer kid on the block, and its recent IPO gives the company more financial ammunition to build its investment portfolio.

Relative to Brookfield Infrastructure (NYSE:BIP) and Macquarie Infrastructure (NYSE:MIC), I think there's more risk here. The larger pool of uncommitted capital makes it quite a bit harder to model future revenues and cash flows, and the company's involvement in offshore energy and crude terminaling seems to me to carry more market and execution risk. That said, a mid-to-high teens return on investments (at the lower end of management's target) would work back to a fair value of around $21 today with a mid-single-digit yield in the same ballpark as BIP and MIC.

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Fortress T & I : One Of The Newest Infrastructure Options