I'm on a mission to uncover some of the ASX's most compelling dividend-paying stocks. The aim is to provide readers with the key data and forecasts to make more informed decisions. Today, we're reviewing the operator of the world's largest metallurgical coal export facility – Dalrymple Bay Infrastructure.
Dalrymple Bay Infrastructure (ASX: DBI) might be one of the most consistent and reliable companies on the ASX – and here's why.
DBI operates the Dalrymple Bay Terminal (DBT), which is the lowest cost export pathway for mines located in the Bowen Basin and services some of the world's largest mining companies including Rio Tinto, Glencore, Anglo America and BHP.
Since it began operating, DBT has undergone seven phases of expansion, growing from its initial capacity of 14.5Mtpa in 1983 to its current nameplate capacity of 85Mtpa.
Interestingly, DBI does not own the terminal. Instead, it owns a 100% interest in a 99-year lease (comprised of a 50-year initial lease term and a 49-year extension option) from the Queensland Government.
Market cap: $1.77 billion
Dividend yield: 6.08%
Price-to-earnings: 23.2
12-month performance: +29.5%
In the half-year 2024 financials, you'll notice two offsetting line items:
$188.2 million in "Handling revenue" and "Handling costs"
$33.1 million in "Revenue from capital works" and "Capital working costs"
These aren't traditional revenue items. Instead, DBI operates with its costs largely covered by customers (through handling revenue) and the Queensland Government (for capital costs).
The two revenue items aren't exactly "revenue" in the traditional sense. DBI has its costs covered by customers (who pay for handling revenue) and Queensland Government (which covers any associated capital costs).
This leaves the Terminal Infrastructure Charge (TIC) revenue as the company’s core revenue stream. With customers and the government covering most operational expenses, DBI’s only notable cost above the EBITDA line is general and administrative (G&A) expenses. This efficient cost structure supports an EBITDA margin of approximately 95%.
The company’s half-year FY24 results reported 84.2Mt of contracted volume, all under 100% take-or-pay agreements. These contracts ensure customers pay for the processing of contracted volumes, regardless of whether they are fully utilised. This structure is crucial in mitigating the impact of the cyclical and volatile nature of resource markets, where coal export volumes can fluctuate due to factors such as demand, supply, weather, and other disruptions.
Since July 2021, DBI has operated under a "lighter-handed" regulatory framework, which has enabled the company to substantially increase its TIC rates. Under this framework, prices are set to rise at or above the rate of inflation through to the end of June 2031.
The half-year FY24 result noted TIC rates of $3.59 a tonne, up 4.2% year-on-year.
DBI has over $395 million of NECAP (non-expansion capital expenditure) projects currently underway, funded by existing debt and cash flow. Since 2008, the company has delivered over $400 million in NECAP programs, which are designed to "add meaningful value to shareholders".
The 8X Expansion Project is another initiative which seeks to add 14.9Mtpa capacity at a total cost of approximately $1.42 billion. DBI is currently exploring various options to progress this project.
Citi has a Buy rating and $3.40 target as of 26 August 2024. In the same report, the analysts modelled the following numbers over the short-to-medium term.
| 2023 | 2024e | 2025e | 2026e |
---|---|---|---|---|
Reported net profit ($m) | 74 | 80 | 92 | 93 |
Net profit growth (%) | ~ | 8.1% | 15.0% | 1.09% |
Dividend per share (cents) | 20.8 | 22.0 | 22.9 | 23.5 |
Dividend yield (%) | 6.7 | 7.1 | 7.4 | 7.6 |
DBI is a model of consistency and reliability. Its costs are covered by both customers and the government, and nearly 100% of its contract volumes are secured under take-or-pay agreements. Additionally, its TIC rates are tied to inflation or may even outpace it.
While DBI may not surprise the market with unexpected outperformance that drives sharp share price gains, it is a company that will steadily grow its earnings at a moderate pace and provide investors with a reliable mid-to-high single-digit dividend yield.
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