Erosion risks

• Political/regulatory intervention on tolls (caps, freezes, new taxes)
• Concession renewal/renegotiation risk at expiry
• Traffic decline from macro downturns, modal shift, or environmental policy

Leading indicators

• Light/heavy vehicle traffic trends
• Changes to toll indexation formulas and sector taxes
• Concession extensions/renewals and new concession awards

Counterarguments

• Concession pricing is regulated and politically sensitive; governments can impose windfall taxes or constraints
• Concession life is finite; long-run value depends on renewal outcomes

Erosion risks

• New competing infrastructure (parallel roads/rail capacity) in specific corridors
• Major policy shifts to reduce road demand

Leading indicators

• Public infrastructure plans affecting competing corridors
• Capital expenditure needs to maintain service quality

Counterarguments

• Route-level monopoly does not prevent volume loss if demand shifts to other modes

Erosion risks

• Concession re-tender/renewal risk
• Regulatory constraints on airport charges and investment plans
• Traffic shocks (pandemics, recessions, geopolitical events) and airline capacity decisions

Leading indicators

• Passenger traffic vs 2019 baseline and vs peers
• Non-aeronautical revenue per passenger
• Concession wins/renewals and contract extensions

Counterarguments

• Up-front competition for concessions is intense; returns can be bid away at award
• Airlines can exert strong bargaining power on fees/route allocations

Erosion risks

• Execution failures (service quality, capex overruns) harming renewal odds
• Sustainability constraints raising required capex and limiting growth

Leading indicators

• Quality-of-service metrics and airline satisfaction
• Capex delivery vs plan and regulatory approvals

Counterarguments

• Operational best practices can diffuse across global operators; differentiation can narrow

Erosion risks

• Bid competition compressing returns on new concessions
• Political/regulatory risk in host countries
• FX and macro volatility affecting traffic and tariffs

Leading indicators

• Concession pipeline wins/losses and bid discipline
• Regulatory changes affecting toll frameworks
• Traffic volumes on key assets

Counterarguments

• Concession markets can become commoditized in bidding; the moat is asset-specific after award, not necessarily at award

Erosion risks

• Labor shortages and wage inflation reducing ability to staff local units
• Integration risk from frequent acquisitions
• Customer procurement pushing more work to lowest-price bidders

Leading indicators

• Order book / backlog coverage
• Organic growth vs peer set in core geographies
• Employee turnover and hiring capacity

Counterarguments

• Many contracts are competitively tendered; footprint helps but does not guarantee pricing advantage
• Local competitors can be strong in their home regions

Erosion risks

• Commoditization of certain installation/maintenance scopes
• Technology shifts requiring continuous upskilling

Leading indicators

• Margin stability through cycles
• Mix shift toward higher-value digital/energy-transition scopes

Counterarguments

• Specialist competitors can outcompete in niche domains; customers may choose best-of-breed providers

Erosion risks

• Project execution risk (cost overruns, delays, claims)
• Competitive bidding compressing margins
• Commodity/input price volatility and subcontractor capacity constraints

Leading indicators

• Large-project margin and claims trend
• Order intake quality (risk profile) and backlog visibility
• Concentration in a few mega-project customers

Counterarguments

• EPC capabilities are shared by multiple global contractors; differentiation can be thin in tenders
• Mega-projects can destroy value if risk is mispriced

Erosion risks

• Labor and subcontractor shortages limiting deployable capacity
• Working capital strain during large project ramps

Leading indicators

• Headcount growth and utilization
• Safety incidents and quality metrics on large projects

Counterarguments

• Capacity can become a liability if demand falls; fixed cost absorption risk

Erosion risks

• Local competitors with lower cost structures
• Cyclical downturns reducing volume and utilization
• Contract risk (claims, disputes, inflation) eroding returns

Leading indicators

• Order book coverage and conversion
• Gross margin and claims provisions
• Mix shift between major projects vs flow business

Counterarguments

• Construction is often price-led; network scale does not guarantee pricing power
• Procurement can be project-by-project with low switching costs

Erosion risks

• Major-project phasing and execution issues
• Input cost inflation not fully passed through

Leading indicators

• Safety and quality KPIs
• Major-project margin versus plan

Counterarguments

• Large projects can destroy value even for strong operators if risk is mispriced

Erosion risks

• Peers adopt similar environmental standards (moat becomes table stakes)
• Higher compliance costs compress returns
• Interest rate shocks and housing demand weakness dominate outcomes

Leading indicators

• Permitting/land sourcing success on land recycling projects
• Reservation and start volumes vs peers
• Regulatory developments on land take and building standards

Counterarguments

• Property development is cyclical and competitive; regulation can raise costs for all rather than create lasting advantage
• Demand (rates/income) often matters more than developer differentiation