IFT - Infratil

[Toddy]

Thank goodness that round of capital injection is over. I'm not really up for an annual billion dollar cap raise.

Hopefully IFT will have an Airport on the block and maybe funds in the bank from Retire Australia sale to fund the next expansion round.

[kiora]

Thank goodness that round of capital injection is over. I'm not really up for an annual billion dollar cap raise.

Hopefully IFT will have an Airport on the block and maybe funds in the bank from Retire Australia sale to fund the next expansion round.

I can sympathise with & agree with what you saying Toddy.
The cap raise came right out of the blue given it was only a week or so before that they had said they had $800m available for investment.
The size of the cap raise does highlight the investment oppurtunities they see in their portfolio though.
Good for NZ inc given that 40% of their investors are NZ retail investors.
The offshore returns should help the balance of trade returns in the long run :).

If we consider our share investments as a business, any interest to pay on money borrowed to take up this offer & stay pro rata is a pretty small proportion of the investment portfolio when considering the dividend returns.

[Snoopy]

It has been pointed out to me that I have made an error in my depreciation estimate calculation. The error being that I have ignored the owned land on which the datacentres are built and onto which any expansions are going to be built. We do have a bit of an obsession in NZ with 'land'. But the vast majority of the CDC land is of course in Australia where most of their business is located.

The interesting thing about datacentres is that when signals are being fired back and forth to them along optical fibres at up to 70% of the speed of light the distance from the point of data use to the point of data storage becomes less relevant. IOW whether the datacentre structure is 5km away or 50km away, the operator on the end is not going to to be able to tell much difference. This means datacentre builders can be a bit less choosy about where they build their structures. They do not have to compete with logistics distribution houses for prime space.

Looking at Googlemaps, it appears the Canberra CDC datacentre there is about 20km out of the city 'in the middle of nowhere'. So I suspect the land bank value of CDC is actually not that high - probably no more than 10% of the value of all CDC long term assets. This means my correction to overall depreciation to take account of land (which does not depreciate) is likely relatively small. Maybe applying to only 10% of the value of the long term assets?

Non current assets at EOFY2023 (the time point used for setting depreciation rates) were $A5,762.3m. 90% of that value (being the non-land assets) amounts to $A5,186m.


The above post is on the side of being 'poorly researched' by my standards. Assuming that land makes up 10% of the long term asset portfolio was just a guess. Can I back it up?

'Oneroof' has an estimated value of 23 Popes Road at Takinini, which is the home of Spark's Takanini data centre
https://www.oneroof.co.nz/property/auckland/takanini/23-popes-road/JRyhD

The June 2021 estimated value was $29.5m, made up of land $10.2m (c.f. $5.6m in 2017) and improvements $19.3m (c.f. $17.5m in 2017). Interestingly 'Oneroof' records the property being sold as a bare land purchase in 2014 for $4.42m. This would have been the time that Spark bought the property for the development of the first stage of their Takanini datacentre in 2014.
https://www.reseller.co.nz/article/1294855/inside-the-60m-takanini-data-centre.html

The reported total development cost was reported as $60m back in 2014 (which would have included the land cost). Now $4.42m/ $60m = 7.4%. That means the land purchase was just 7.4% of the project cost at the time. Since opening, the Spark Takanini datacentre has undergone a multi-million dollar capability upgrade. So as far as book value goes, the value of long term assets at the Takainini site that are land may be as low as 5%.

One can't be sure that such development costs are indicative of the relative long term assets values of a new datacentre portfolio built by CDC today. It looks like land in Auckland at least has shot up in value in relative terms since the Spark Takanini datacentre was conceived. Yet despite this increasing land price effect, I believe this Spark Takanini site data is good supporting evidence that my overall guess of the land part of the CDC long term asset portfolio - being no more than 10% of the total long term assets on the books - is reasonable, and maybe even a little high.

SNOOPY

[Snoopy]

When you knocked down with yet another intellectual 'sucker punch', the only thing to do is to get up again. With the latest information and interpretations flowing through the knowledgometer, time for another crack at this exercise.

We know that Infratil own a 48.24% stake of CDC. Rather than create possible extra confusion by trying to adjust for the Infratil share all the way through, I will use the raw CDC numbers and make any Infratil ownership share adjustments right at the end.

.


Interest Calculation

Interest which is used to finance construction projects is subject to 'capitalisation of interest' in any net profit calculation. If interest is capitalised, it no longer becomes an expense.

Starting from the Infratil capital raising presentation:
https://infratil.com/news/infratil-announces-nz1150-million-equity-raising/infratil-investor-presentation-nz1150-million-equity-raise/

Slide 14 shows a key CDC metric is 7-10 times leverage. I will use the larger number (10), because that will give me the largest interest capitalisation effect. A leverage ratio of 10 means $10m of debt for every $1m of equity is CDC's preferred new project 'funding balance'.

If we look at the limited CDC balance sheet information we are given (AR2024 p80) total assets rose from $5,872.4m (EOFY2023) to $6,820.7m (EOFY2024), which is a rise of $948.3m.

Let's assume that all of that increment represents new data centre builds, being constructed over FY2024. Now, new assets are funded by a combination of debt and equity. With a 10:1 leverage ratio, we are looking at 'new project funding units' of $948.3m/11= $86.2m. In this instance this means $86.2m of equity funding, with the balance $948.3m-$86.2m = $857.1m funded by debt. Interest which is associated with this $857.1m in debt funding is interest that becomes capitalised.

As before, I assume total debt, across the year had a representative value of $4,251.1m. Let's say that USPP funding and other bank funding was secured at a rate of 4.5% (a revised pure guess on my part). That means the annual interest charge for CDC would be: 0.045 x $A4,251.1m = $191.3m.

However, this calculation does not take into account the proportion of interest that was capitalised. The amount of interest capitalised represents $857.1m/$4,251.1m = 20.2% of the outstanding debt. 20.2% of the representative interest bill is: 0.202 x $191.3m = $38.6m. So $38.6m is the amount of the pool of net interest that I would expect to be capitalised, following on from all of my assumptions.





Depreciation and Amortisation calculation

My average modelled depreciation time remains at 40 years. The buildings may be on the books with a longer life than that, perhaps 50 years. But all of the cooling equipment will depreciate much faster than 40 years. So 40 years is my compromise 'combined total depreciation schedule number'. Amortisation is assumed to be zero over the period, as no goodwill would have been booked on the balance sheet for a 'green field build' data centre.

https://infratil.com/news/infratil-announces-nz1150-million-equity-raising/infratil-investor-presentation-nz1150-million-equity-raise/

From slide 7:
"388MW under construction across current footprint"

From slide 13:
"Operating capacity 302MW", "388MW expected to be completed by the end of FY2026."

So we can think of the 'under construction' section of future data centre roll outs as being completed over 3 years. That averages out at 388MW/3= 129MW to be completed over each of FY2024, FY2025 and FY2026. So we could say the paid for work under construction represents ( 129MW/(129MW+302MW) =) 30% of 'long term datacentre assets'.

Non current assets at EOFY2023 (the time point used for setting depreciation rates) were $A5,762.3m. 90% of that value (being the estimated non-land assets) amounts to $A5,186m. 70% of that non land value (being the depreciable assets that have finished construction) is $3,630m. Assuming these assets depreciate on average over 40 years, this gives an annual depreciation charge of ($3,630m/40=)$90.8m.







iif/ Recalculating Net CDC Profit after once again revising interest charges

According to 'forest' who attended the Infratil capital raising presentation, CDC presently earns between 10-15% on its different assets. So I will 'plumb down the middle' and take my asset return percentage being 12.5% as my estimate. I therefore estimate the income generating ability of those CDC assets on the books at EOFY2024, which I will call EBITDAF, to be: 0.125 x $1,403.4m = $175m. However, it seems that in reality the EBITDAF earning ability of CDC was a little above this lofty goal, coming in at $271m (although this is admittedly a definitively before tax figure. It could be that the return touted by 'forest' of $175m is NPAT.

I now have two operational NPAT figures for CDC over FY2024 to present:

Using NPAT = 0.7 (EBITDAF - I - DA); (assuming the Australian corporate tax rate of 30%)

For no capitalisation of interest charges, I get:
'Operational NPAT' = 0.7 ( $271m - $191.3m - $90.8m ) = -$7.8m, of which the IFT share is 0.4824 x -$7.8m = -$3.3m

For capitalisation of interest allowed, I get:
'Operational NPAT' = 0.7 ( $271m - ($191.3m - $38.6m) - $90.8m ) = $19.3m, of which the IFT share is 0.4824 x $19.3m = $9.3m


I am -still- not guaranteeing that I have got my operational profit calculation right. But even with some more imagined future tweaks, I see no way to turn a $9.3m profit into a (0.4824x$201.9m=)$97.4m profit (the NPAT declared in AR2024 p80). That means the $97.4m that Infratil 'earned' from CDC must be largely (over 90%) from asset revaluations, based on what CDC 'expects to earn' when the current CDC datacentre construction program is complete.

(The actual operational NPAT is adjustable and determinable by the gearing of CDC, which will have been decided upon by Infratil and its ownership partners. It could easily become more profitable by having less debt in its underlying structure. But to avoid paying back some of Infratil's injected capital as a 'tax bill', Infratil have kept the interest bill high. This is what accountants call 'tax efficiency'.)

SNOOPY

[kiora]

Can AI solve the problems it creates?

"AI's power struggle: An energy crisis in the making"


"Considering the broader implications of AI's trajectory, we envisage dramatic consequences for US power demand.

The chances that we need 1 GPU per person is increasing quickly

Combined, search, co-pilots, summarisation, the automation of processes and service offerings of businesses, autonomous driving and gaming alone may increase the amount of GPUs we need over time to somewhere around 1 GPU (of current NVIDIA Hopper quality) per person. While the computational power of GPUs will increase and improve the ability to make computational networks, so will their price and power usage.

In 8 or so years, the amount of electricity needed by data centres is expected to increase to 27% of total US electricity consumption from around 5% today

Implications for Renewable Energy

The implications of the forecast are significant. To have 1 GPU for every 3 people, we need to increase the grid by around another 1/3rd. To put this into context, US electricity demand has been growing by around 0.5% per annum for many decades, but that might ramp 6x to around 3% per annum in just a couple of years. The increase in the number of gas-fired power plants and renewable energy farms needed to enable this technology will be significant relative to how many we have in place today.

None of this demand for electricity accounts for the increasing demand from our need to reduce our fossil fuel consumption. The electrification of cars, engines more generally, other transport (ships, planes and trains) and other equipment that currently uses oil will add to this demand for electricity.

This increase in demand is attributed to several factors, including electrification, manufacturing, onshoring, LNG, crypto, greater industrial loads and data centre growth. Recent advancements in GenAI are compounding and accelerating these factors, leading to the formation of the next power demand super cycle…To be clear, it takes only a fraction of what is being forecasted to be in this super cycle.”

Before these technologies (AI, semiconductors, autonomous vehicles, search, co-pilots, automation of processes, summarisation, gaming to name a few) can reach their full potential, we believe there’s a high chance that we’ll first run out of cheap power."

[kiora]

I see no one has extroplated what the $2+b of available funds to invest means yet

With the leverage of 6x for data centers & renewable energy then could easily be $12+b in new investment ie doubling the AUM that IFT already has.

This is likely to happen over the next,2? years.

With revaluations then what will EBITDA be?

IFT is shovel ready,are investors?

[alokdhir]

I see no one has extroplated what the $2+b of available funds to invests means yet

With the leverage of 6x for data centers & renewable energy then could easily be $12+b in new investment ie doubling the AUM that IFT already has.

This is likely to happen over the next,2? years.

With revaluations then what will EBITDA be?

No wonder Fisher Funds have chosen to sacrifice 3% of their holdings in great MFT to invest in rights of IFT ....both their flagship NZ Growth Fund and KFL did same ...they see more potential in IFT then MFT ...cud be short term play as they can always reverse ahead at some profits ...KFL IFT holdings nearing 20% mark so will need slow pruning ahead ...but yours 80/20 going great guns I reckon

[kiora]

"One advantage working in favour of local data centre operators’ is that “big tech” (i.e., Amazon, Alphabet, and Microsoft) are struggling to navigate local councils, power utilities, costs and complexities of development approvals, etc. This means local operators that have already secured large land banks close to major population centres are in a prime position to service the big overseas players (thank goodness for good old Aussie bureaucracy and red tape!)"

https://www.livewiremarkets.com/wires/wondering-how-to-invest-in-ai-take-a-look-at-asx-data-centres?utm_medium=email&utm_campaign=Trending%20on%20Livewire%20-%20Thursday%2011%20July%202024&utm_content=Trending%20on%20Livewire%20-%20Thursday%2011%20July%202024+CID_85916dbad4983af 962a9ab3a0c8905a1&utm_source=campaign%20monitor&utm_term=THE%20AI%20TRADE

[Jaa]

Do Infratil and its band of merry investors have FOMO too?


A team of equity research analysts at Barclays posited that a rush of investments into data centers by cloud-computing service providers appeared to have more in common with “FOMO” — that is, “fear of missing out” — than “Field of Dreams,” a movie famous for the line “if you build it, they will come.”

They highlighted a dichotomy between Wall Street estimates for AI-related capital expenditures and the additional revenue that these investments are supposed to help generate.

While Wall Street expects cloud-service providers to spend an additional $60 billion year-over-year on chips and data centers, they are only expected to reap an additional $20 billion in revenue by 2026.

The Barclays team concluded that, much like companies that laid fiber-optic cable during the dot-com years, the biggest technology firms appear to be overspending on infrastructure.

Of note, the additional capacity produced by projects already under way would be enough to power the existing internet, plus 12,000 new applications with the user base and input demands of ChatGPT, according to Barclays’ numbers. This suggests the plans of hyperscalers to build new data centers are exceeding expected demand.

Wall Street is becoming more skeptical of artificial-intelligence hype helping to power stocks (https://www.marketwatch.com/story/wall-street-is-becoming-more-skeptical-of-artificial-intelligence-hype-helping-to-power-stocks-983aa5ca)


The comparison to fiber companies during the dotcom boom is the right one in my mind. Anyone remember Ziggy and Reach PCCW (https://edition.cnn.com/2003/BUSINESS/asia/02/20/aust.telstra.biz/index.html)?

[maclir]

Maybe. But then they've been in CDC since '16.

[huxley]

Retail offer oversubscribed, despite Snoppy’s efforts here ;)

[Sideshow Bob]

Retail offer oversubscribed, despite Snoppy’s efforts here ;)

https://www.nzx.com/announcements/434374

Infratil Limited ("Infratil") is pleased to announce that its non-underwritten retail share offer ("Retail Offer") has closed oversubscribed.

The Retail Offer received strong support from eligible shareholders, with Infratil receiving valid applications totalling approximately NZ$426.2million[1][2][3]. Applications were received from 37,548 eligible shareholders, representing a higher participation level than Infratil's 2023 Retail Offer (27,983 shareholders).

In recognition of the strong support from retail shareholders and the desire to, as far as is practicable, allow shareholders to maintain their proportionate ownership following the equity raising, Infratil has elected to exercise its discretion to accept oversubscriptions. Infratil is accepting an additional NZ$125 million [1][2] of subscriptions, bringing the total amount raised under the Retail Offer to NZ$275 million[1][2].

A total of approximately 27,093,600 new fully paid Infratil ordinary shares will be issued under the Retail Offer at the issue price of NZ$10.15 per share (or A$9.243 per share for ASX Retail Offer applicants [2]), being the price at which shares were issued in the placement announced on Monday, 17 June 2024. Scaling has been applied by reference to each eligible shareholder's pro rata Infratil shareholding on Friday, 14 June 2024 at 9:00pm (NZST) / 7.00pm (AEST) ("Record Date"). Allotment statements will be sent to participating shareholders on Tuesday, 16 July 2024, with refunds of any surplus application amounts to occur on or as soon as possible after that date in accordance with the terms of the Retail Offer Document dated 20 June 2024 ("Retail Offer Document”).

The Retail Offer is part of Infratil's equity raising announced on Monday, 17 June 2024 which also included an underwritten NZ$1,000 million placement of shares. The total amount raised under the equity raising is now NZ$1,275 million[1][2], with proceeds of the equity raising used to fund further investment into data centre operator CDC’s accelerating growth as well as provide more flexibility for growth across Infratil’s global portfolio.

The Retail Offer provided eligible Infratil shareholders, being shareholders having an address in New Zealand or Australia as at 9.00pm (NZST) / 7.00pm (AEST) on the Record Date, with the ability to subscribe for up to a maximum of NZ$150,000 and A$45,000[4], respectively, worth of new shares in Infratil on and in accordance with the terms and conditions in the Retail Offer Document.

Settlement on ASX is expected to occur on Monday, 15 July 2024 and on NZX on Tuesday, 16 July 2024. Allotment of new shares is expected to occur on the NZX and ASX on Tuesday, 16 July. Trading of those shares is expected to commence on NZX on Tuesday, 16 July 2024 and on ASX on Wednesday, 17 July 2024. The new shares to be issued under the Retail Offer will rank equally in all respects with Infratil's existing ordinary shares.

[Jaa]

Maybe. But then they've been in CDC since '16.

It is valued off the pipeline potential though.

Which as that chart in the Livewire article shows is mostly in Sydney, a much more competitive market than CDC's home market in Canberra.

Those clever people at Goodman plan to just convert their Aus logistical warehouses into data (warehouse) centres, either themselves or by offering ready to build sites complete with power and internet connectivity to the hyperscalers. How do you compete with that?

[maclir]

It is valued off the pipeline potential though.

Which as that chart in the Livewire article shows is mostly in Sydney, a much more competitive market than CDC's home market in Canberra.

Those clever people at Goodman plan to just convert their Aus logistical warehouses into data (warehouse) centres, either themselves or by offering ready to build sites complete with power and internet connectivity to the hyperscalers. How do you compete with that?

I imagine you compete based on the usual things, price, expertise, fitness for purpose.
You have to retrofit the buidling, once you've ensured there are no problems with zoning, determined the power supply etc are viable. Then you have to drum up the business. So it's not a fait accompli, though there might be a useful starting point.

[Toddy]

It is valued off the pipeline potential though.

Which as that chart in the Livewire article shows is mostly in Sydney, a much more competitive market than CDC's home market in Canberra.

Those clever people at Goodman plan to just convert their Aus logistical warehouses into data (warehouse) centres, either themselves or by offering ready to build sites complete with power and internet connectivity to the hyperscalers. How do you compete with that?

IFT management are really good at deciding when an investment reaches maturity and exiting.

Are we there yet? I'm thinking No.

[kiora]

Something for the analysts to unpick

For investors that have time then there is compounding returns
For others there is confounding returns

"Brookfield Renewable Just Made a Game-Changing Move. Here's What You Need to Know."
https://finance.yahoo.com/news/brookfield-renewable-just-made-game-103000849.html
https://www.marketscreener.com/quote/stock/NEOEN-46633605/

NEOEN $6.5 b offer."Neoen currently has 8.3 gigawatts (GW) of assets in operation or under construction. In addition, it has 20 GW of advanced-stage development projects across Australia, France, and the Nordics."

IFT owns 37% Longroad E,37%valued at $2b ($4b 12 months)
LRE 3.5 GW owned,5.4 GW under contract for O & M & Asset Management Services

https://www.longroadenergy.com/renewable-energy-projects/

Brookfields are no slugs

[Toddy]

Something for the analysts to unpick

For investors that have time then there is compounding returns
For others there is confounding returns

"Brookfield Renewable Just Made a Game-Changing Move. Here's What You Need to Know."
https://finance.yahoo.com/news/brookfield-renewable-just-made-game-103000849.html
https://www.marketscreener.com/quote/stock/NEOEN-46633605/

NEOEN $6.5 b offer."Neoen currently has 8.3 gigawatts (GW) of assets in operation or under construction. In addition, it has 20 GW of advanced-stage development projects across Australia, France, and the Nordics."

IFT owns 37% Longroad E,37%valued at $2b ($4b 12 months)
LRE 3.5 GW owned,5.4 GW under contract for O & M & Asset Management Services

https://www.longroadenergy.com/renewable-energy-projects/

Brookfields are no slugs

Every time I start to question my (boring) investment in IFT and the missed opportunities of selling some to buy so called 'cheap' NZ sticks I get a good kicking with reminders from posts like this.

Thanks.

Ift is a real gem, positioned brilliantly and in the right international trends to continue it's growth record. Well, accelerate actually.

With the latest cap raise put to bed, and the plans being implemented then we should be very excited about where IFT could end up.

I cannot remember ever investing in a Kiwi stock like this that is investing billions pa in new ventures and building 'real' assets and revenue.

[kiora]

I agree totally Toddy.Compounding every year for 30 years is no mean feat for any company.
And continually updating the roadmap for future returns.

Patience is pertinant.
Some years SP only increases over 12 particular days/365

[warthog]

Every time I start to question my (boring) investment in IFT and the missed opportunities of selling some to buy so called 'cheap' NZ sticks I get a good kicking with reminders from posts like this.

Thanks.

Ift is a real gem, positioned brilliantly and in the right international trends to continue it's growth record. Well, accelerate actually.

With the latest cap raise put to bed, and the plans being implemented then we should be very excited about where IFT could end up.

I cannot remember ever investing in a Kiwi stock like this that is investing billions pa in new ventures and building 'real' assets and revenue.

IFT is basically alone in its proposition of being an accessible public company while essentially being a private market fund.

[kiora]

Meaning private market debt fund?
and publically traded equity fund Warthog?

[kiora]

Aagh
got it from your earlier post

"One might consider IFT a publicly-traded, infrastructure themed, private equity investor fund."

[Snoopy]

Retail offer oversubscribed, despite Snoopy’s efforts here ;)


I am not here to put people off investing in IFT. I am much more interested in letting investors know what it is they are investing in, and letting them make their own investing decisions from there. In particular, in relation to the flagship data centre investment CDC.

I am reasonably happy with my 7th attempt at estimating the present day profitability of CDC data centres (my post 3754). I was probably a little aggressive with estimating the amount of interest being capitalised. (remember any interest that is capitalised reduces the interest bill). That means my lowly $9m NPAT for FY2024 estimate (on EBITDAF of $271m) could be a bit high. BTW these figures say nothing about the profitability of the datacentre concept. IMO these 'low to no' present day profits have been deliberately engineered by Infratil to keep as much owner equity cash in CDC as possible (tax paid is cash lost from the CDC financial model). If IFT wanted CDC to be more profitable right now, all they would have to do is stump up with more equity and repay CDC debt. It is that simple. But instead, it makes more sense in a growing business to make the best use of the 'owner cash' that you can.

All the excitement of the extra $600m from the capital raise earmarked for CDC? From a valuation perspective that money has already gone, being that capital required to support the borrowing program for the 'under construction' and 'future build' programs' of CDC. There will be no further sudden incremental gains from the $600m. It is effectively in the balance sheet, hiding in the improved valuation of the CDC 'associated asset', as committed expenditure already. (It is the discounted cashflow value of the CDC data centre program that 'is being built' / 'will be built' that is reflecting this money in the balance sheet (by way of jumped up asset valuations) right now).

Future business growth assumptions, despite the industry experience and technical expertise of the people preparing them, are just assumptions nevertheless. And the more highly leveraged the datacentre entity being valued is, the more likely the worst case scenario of multi-million dollar datacentre asset write-downs and a capital injection from IFT shareholders to shore up the CDC balance sheet becomes. Note that I am not saying such things are likely. I am just reminding IFT investors that they are a possibility, depending on how the datacentre market develops in real time.

SNOOPY

[Snoopy]

I was interested in the 4th July Infratil announcement of the revaluation of CDC assets, taking into account the latest confirmed development plans

"Infratil’s 48.25% investment in CDC is now valued at between A$4,159 million to A$4,940 million (with a midpoint of A$4,524 million), up from A$3,783 million to A$4,368 million (with a midpoint of A$4,058 million) at the end of March 2024."

This implies an incremental increase in value $376m-$572m (with a mid point increment of $466m).

The 'incremental future build capacity', which is a reflection of this increased valuation, is as follows:



SiteIncremental Capacity


Sydney+603MW


Melbourne+59MW



Notes from the press release

1/ The 'blended cost of equity' used in the valuation is 11.50% between. This primarily resulting from:
1i/ An increase in gearing as a result of higher forecast debt levels as CDC continues investment in its expanded development pipeline.
1ii/ The increase in gearing is partially offset by a decrease in the asset-specific risk premium, driven by the valuer’s assessment of
the status of CDC’s customer discussions and their overall view of CDC’s ability to deliver on its forecast growth.

2/ The risk-free rate has remained constant at 3.90%.

3/ Cost of Equity 11.50%.

4/ Asset Beta 0.55.

5/ Long term EBITDA Margin 85%

6/ Terminal growth rate 2.5%

7/ From a funding perspective, this valuation reflects an increase of ~A$150 million relative to what was assumed in the full year (March 2024) valuation.

8/ Forecast period 15 years (to 2039).

---------------------------

We also know that
"CDC is currently in advanced negotiations with customers for over 400MW of capacity across multiple sites, expected to come online over the next 4-5 years."

If we regard this as a new capacity development schedule, we could say that 400MW / 4.5 years, equals a realistic incremental development schedule of 89MW per year.

We note that the 'Enterprise Value' increment of CDC (being 'Market Capitalisation'+'Total Debt'-'Cash on Hand'=) +$A964m.
OR 'Market Capitalisation'+'Net Debt' = +$A964m.

Net debt as at 30 June 2024 was A$3,262 million (Snoopy note: I presume this is 'Total Debt' - 'Cash on Hand').
As at the FY2024 balance date: Total Liabilities = A$4,254.1m-A$154.7m=A$4,099.4m (assuming all current assets are cash). This means net debt has gone down a minimum of: A$4,099.4m - A$3,262m = A$837.4m in the incremental 3 month period from EOFY.

There is no strict 'market capitalisation' for CDC, as CDC is not independently listed on any exchange. But there must be an 'agreed capitalised value', something Infratil are calling 'market capitalization', which has therefore gone up in value by at least:

Market Capitalisation Increment - $A837.4m = +$A964m
=> Market Capitalisation Increment = $1,801.4m

SNOOPY

[kiora]

https://finance.yahoo.com/news/brookfield-renewable-just-made-game-103000849.html

Of note:When I say Brookfields are no slugs
"The company believes strategic acquisitions should drive its annual FFO per-share growth rate above 10%"

Whereas IFT grows organically within its own developments & achieves far greater growth rates

Few other company in the renewable sector are growing as fast as IFT

[Snoopy]

Notes from the press release

1/ The 'blended cost of equity' used in the valuation is 11.50% between. This primarily resulting from:
1i/ An increase in gearing as a result of higher forecast debt levels as CDC continues investment in its expanded development pipeline.
1ii/ The increase in gearing is partially offset by a decrease in the asset-specific risk premium, driven by the valuer’s assessment of
the status of CDC’s customer discussions and their overall view of CDC’s ability to deliver on its forecast growth.

2/ The risk-free rate has remained constant at 3.90%.

3/ Cost of Equity 11.50%.

4/ Asset Beta 0.55.



It is quite disappointing when a company uses different terms to muddy the waters for what is ostensibly the same thing. The term 'blended cost of equity' is not one I have heard before. Yet a few lines further down, Infratil just use the phrase 'cost of equity' and say it is the same number. So:

a/ Is 'blended cost of equity' and 'cost of equity' the same thing? OR
b/ Are Infratil talking about the 'Weighted Average Cost of Capital' (WACC), where the cost of capital is 'blended' with the cost of debt to create an overall 'discount rate'?

It looks like the answer is a/. The implication is that, despite CDC only operating data centres, the 'cost of equity' is different between different data centres and so the overall result has to be 'blended'. Very strange. Nevertheless, it would be useful to know what the WACC is for CDC.

WACC Formula and Calculation

WACC=(E/V×Re)+(D/V×Rd×(1−Tc))

where:
E=Market value of the firm’s equity
D=Market value of the firm’s debt
V=E+D
Re=Cost of equity
Rd=Cost of debt
Tc=Corporate tax rate (30% in Australia)

​---------------------------

The problem is there is no 'market' information for CDC, as CDC is not listed. So I guess we have to rely on balance sheet information of the same?

The most recent full balance sheet information that we have for CDC is in the Infratil Annual Report for FY2024 on page 80.
Equity= $2,575.6m, Debt $4,245.1m, Total Assets $6,820.7m. There is no information on what quantity of the liabilities is money owed to contractors working on building projects. Likewise there is no information on the quantum of assets are accounts to be collected from customers. So we just have to make an assumption that the quoted debt to asset position of the company is also indicative of the company's financing position. Using the numbers in this way gives:

An equity ratio of $2,575.6m/$6,820.7m = 38.8%
A debt ratio of $4,245.1m/$6,820.7m = 62.2%

I would then make an educated guess that the cost of debt is a couple of percentage points above the risk free rate of return: 3.90%+2.00%=5.90%

Putting all of these numbers into the WACC formula above gives me:

WACC=(0.388×11.5%)+(0.622×5.90%×(1−0.3)) = 7.03%

This is how I would do such a calculation anyway. I would be interested to hear if someone has a different opinion on how it should be done!

SNOOPY

[Snoopy]

Notes from the press release

1/ The 'blended cost of equity' used in the valuation is 11.50% between. This primarily resulting from:
1i/ An increase in gearing as a result of higher forecast debt levels as CDC continues investment in its expanded development pipeline.
1ii/ The increase in gearing is partially offset by a decrease in the asset-specific risk premium, driven by the valuer’s assessment of
the status of CDC’s customer discussions and their overall view of CDC’s ability to deliver on its forecast growth.

2/ The risk-free rate has remained constant at 3.90%.

3/ Cost of Equity 11.50%.

4/ Asset Beta 0.55.



This is the Capital Asset Pricing Model formula for calculating the expected return of an asset, given its risk:

ERi​ = Rf​+βi​(ERm​−Rf​)

where:
ERi​ = expected return of investment
Rf​ = risk-free rate
βi ​= beta of the investment
(ERm​−Rf​) = market risk premium​

I am not sure what the 'market risk premium' should be. My feeling is that the total return of the market should be a figure of the order of 6,7,8 percent. There is of course no formal market for CDC shares. So its performance relative to the market 'βi' which we have been given must of necessity have been a guess. Nevertheless, sticking all of the numbers we have into the above equation gives:

ERi​ = 3.90% ​+ 0.55x​(7.0%−3.90%) = 5.61%

That figure seems quite a lot less than the figure of 9-10% that Spark are quoting for their "NPAT / 'Capital Invested' " in their own data centres. But maybe it is just a reflection of the generally lower profitability a data centre experiences as it gets larger and larger (like CDC plans)?

The other unfortunate flow on effect of this calculation for CDC is that it appears the 'expected return' is lower than the WACC. Good luck with building a successful business model on that premise?

SNOOPY

[Toddy]

Oh well, I guess this investment is not for you then Snoopy.

Using your methodology, what do you consider a better long term investment than IFT on the ASX, NZX?

[Snoopy]

Oh well, I guess this investment is not for you then Snoopy.

Using your methodology, what do you consider a better long term investment than IFT on the ASX, NZX?


It is no secret I have been using the slump in the Spark share price as it crashed down from $5 towards $4 to increase my holding in that company. It is also clear that Spark, with their ten year deals, are making more money up front on their investment in datacentres than CDC is making. As I have said before this doesn't necessarily mean that Spark are better long term operators of datacentres than CDC. It more reflects the fact that CDC are in an extended development phase. And of course datacentres are only a relatively small part of the total Spark operation. But I still want to see the growth numbers that CDC are basing their huge increase in datacentre value on.

I feel a discounted cashflow analysis for CDC coming on. But it is a matter of getting those input numbers right.

The Infratil capital raising investor presentation:
https://infratil.com/news/infratil-announces-nz1150-million-equity-raising/infratil-investor-presentation-nz1150-million-equity-raise/

on slide 27 suggests that
"CDC currently generates a blended EBITDAF per ICT MW across all sites and customer segments of over A$2.0m"

Since the July announcement of a larger datacentre asset base of
603MW + 59MW = 662MW

This 'downstream presumes' an incremental increase in EBITDAF of (A$2.0m x 662MW =) A$1,324m per year? But of course, this is only the positive cashflow from operations. We also need to put in the negative cashflow required to build these incremental data centres in the first place (not sure how we do that).

The other thing I would need to do is estimate when this new incremental capacity comes on line, as that determines how many years in the future the 'incremental discounted cashflow' is discounted from. This is the kind of argument that would win me over.

Not reflecting in the historical glow: "We sold some windmills in the middle of the North Island at a good price" and "Made a good few bucks on Zed Energy." "Therefore we are good future forecasters of the demand for datacentres and know how to invest in that space accordingly."

SNOOPY

[Ggcc]

It is no secret I have been using the slump in the Spark share price as it crashed down from $5 towards $4 to increase my holding in that company. It is also clear that Spark, with their ten year deals, are making more money up front on their investment in datacentres than CDC is making. As I have said before this doesn't necessarily mean that Spark are better long term operators of datacentres than CDC. It more reflects the fact that CDC are in an extended development phase. And of course datacentres are only a relatively small part of the total Spark operation. But I still want to see the growth numbers that CDC are basing their huge increase in datacentre value on.

I feel a discounted cashflow analysis for CDC coming on. But it is a matter of getting those input numbers right.

The Infratil capital raising investor presentation:
https://infratil.com/news/infratil-announces-nz1150-million-equity-raising/infratil-investor-presentation-nz1150-million-equity-raise/

on slide 27 suggests that
"CDC currently generates a blended EBITDAF per ICT MW across all sites and customer segments of over A$2.0m"

Since the July announcement of a larger datacentre asset base of
603MW + 59MW = 662MW

This 'downstream presumes' an incremental increase in EBITDAF of (A$2.0m x 662MW =) A$1,324m per year? But of course, this is only the positive cashflow from operations. We also need to put in the negative cashflow required to build these incremental data centres in the first place (not sure how we do that).

The other thing I would need to do is estimate when this new incremental capacity comes on line, as that determines how many years in the future the 'incremental discounted cashflow' is discounted from. This is the kind of argument that would win me over.

Not reflecting in the historical glow: "We sold some windmills in the middle of the North Island at a good price" and "Made a good few bucks on Zed Energy." "Therefore we are good future forecasters of the demand for datacentres and know how to invest in that space accordingly."

SNOOPY

I agree that if you find a share that suits your investment style, stick with your gut instinct and invest in that. With what is on the table now I am sure that when you add capital gains and dividends, IFT total investor return will outpace Spark over the next 10 years. This can change if some new investment happens that is outside of their current portfolio, but if there is status quo then I am totally confident that IFT will outperform Spark by a long shot over a 10 year period.

[Snoopy]

I agree that if you find a share that suits your investment style, stick with your gut instinct and invest in that. With what is on the table now I am sure that when you add capital gains and dividends, IFT total investor return will outpace Spark over the next 10 years. This can change if some new investment happens that is outside of their current portfolio, but if there is status quo then I am totally confident that IFT will outperform Spark by a long shot over a 10 year period.


I am not saying you are wrong Ggcc. But looking at AR2024 p24 this morning, and the EBITDAF from each Infratil division, I am surprised how dominant 'One NZ' has become (EBITDAF of $545.5m, - 63% of all Infratil EBITDAF). We now know that the second biggest EBITDAF provider, CDC, EBITDAF $140.8m, has supplied most of their 'earnings' via future data centre revaluations. So it is really only 'One NZ' and to a lesser extent Manawa Energy (EBITDAF $74.1m) and Wellington Airport (EBITDAF $70.7m) that are providing the cash that allows Infratil to survive.

Thus it is very clear that Spark and Infratil (via One NZ) are deadly competitors in the same telecommunications space. The big difference being that Infratil takes their 'One NZ' cash profits and reinvests them in various growth prospects outside of telecommunications, whereas Spark takes their profits and gives them straight back to shareholders to 'do what they will' with. So the real comparison for the future is not Infratil verses Spark. It is really Infratil verses Spark PLUS the results of whatever Spark shareholders choose to do with their dividend stream.

If it was a straight fight between 'Spark' and 'One NZ' I would still go for Spark as the provider of the more complete telecommunications packages. I do acknowledge 'One NZs' Jason Paris as a strong CEO though, even though he isn't quite as good as Spark's Jolie Hodson ;). In fact before my recent Spark buy up, my plan was to wait for the 'One NZ' float, then buy Spark on any market weakness of Spark caused by institutions having to rebalance their portfolios into a newly floated 'One NZ' !

SNOOPY

[kiora]

". The consequence of this extreme spending on GPUs has led to a similar rise in data centre demand, with Nvidia’s GPU data centre sales up 409% in the last 12 months. There is no doubting the AI phenomenon, but now we have to power it.

Phase two of this game-changing technology will be all about AI infrastructure and powering the new hardware. Data centre infrastructure and centre managers are the obvious winners"

https://www.livewiremarkets.com/wires/two-surefire-thematics-for-the-next-two-years-and-3-stocks-to-play-them?utm_medium=email&utm_campaign=Trending%20on%20Livewire%20-%20Monday%2015%20July%202024&utm_content=Trending%20on%20Livewire%20-%20Monday%2015%20July%202024+CID_78695e97dd30c4156 4bb4f17012e065f&utm_source=campaign%20monitor&utm_term=READ%20MORE

"The global generative AI in energy market size was estimated at US$620.11 million in 2022 and it is projected to hit around US$5,338.09 million by 2032, growing at a CAGR of 24.02% during the forecast period from 2023 to 2032"

[Ferg]

*MISINFORMATION ALERT*

The following sentence is misleading.


We now know that the second biggest EBITDAF provider, CDC, EBITDAF $140.8m, has supplied most of their 'earnings' via future data centre revaluations.

The post above implies the majority or all of EBITDAF comes from revaluations. EBITDAF is before depreciation and revaluations. NPAT includes revaluations.

Fact check from page 2 of the IFT / CDC presentation:

EBITDAF represents net earnings before interest, tax, depreciation, amortisation, financial derivative movements, revaluations, gains or losses on the sales of investments, and excludes acquisition and sale related transaction costs and International Portfolio Incentive Fees.

[kiora]

So Snoopy is "spruiking" Spark by posting on the IFT thread?

"I have been using the slump in the Spark share price as it crashed down from $5 towards $4 to increase my holding in that company"

Even though he knows the Spark pays out more in dividends than EPS?

https://www.marketscreener.com/quote/stock/SPARK-NEW-ZEALAND-LIMITED-6492600/finances/

[Ferg]

Hard to say kiora but plugging the WACC value into the ERi {expected return on investment} value for the CAPM formula is also a bit weird. Could be the Covid brain fog. I'm also surprised he stated earnings in the context of EBITDAF includes revaluations when this was laid out correctly in earlier posts.

"Slow down Cowboy"

[Snoopy]

*MISINFORMATION ALERT*
The following sentence is misleading.

Snoopy wrote:
"We now know that the second biggest EBITDAF provider, CDC, EBITDAF $140.8m, has supplied most of their 'earnings' via future data centre revaluations."

The post above implies the majority or all of EBITDAF comes from revaluations. EBITDAF is before depreciation and revaluations. NPAT includes revaluations.


I admit my wording may be sub-optimal. I contest that it is misinformation though. The point I was trying to make was that the earnings for associates follow different rules to the earnings of subsidiaries, which is why I put the word 'earnings' in quotation marks in my text that you quoted above. If I had meant 'earnings' to be interpreted as EBITDAF then I would have written EBITDAF. I did not do this.

The overlaying problem is you might class that entire table in AR2024 p24 titled 'Proportionate EBITDAF' as 'misinformation'. Because it implies that you can sum that table and get the EBITDAF for Infratil, when in fact this is not true. The 'associate investment(s)' by Infratil, including CDC, cannot be consolidated in this way if accounting rules are followed.

AR2024 Note 6.2 lists equity accounted 'earnings' of CDC as $116.3m. But this number mostly represents capital adjustments to the value of the CDC portfolio. It is not representative of current year CDC revenue. Yet these associate 'earnings' are added to 'operating revenue' from the Infratil subsidiaries in the 'Consolidated Statement of Comprehensive Income'. I am not implying there is anything sinister in this treatment of revenues. This is just how the accounting rules work.

The point is you can decouple EBITDAF and 'revaluations' in a subsidiary. But you cannot decouple EBITDAF and 'revaluations' in an associate investment. It becomes an artificial construct if you are arguing that EBITDAF and revaluations for an associate should be remarked on separately, because the accounting reporting laws do not endorse such 'separate reporting'.

SNOOPY

[bull....]

trump hates wind and what happened increased the odds of him winning

https://www.theguardian.com/us-news/gallery/2024/jul/13/trump-pennsylvania-rally-shooting-in-pictures

[Snoopy]

So Snoopy is "spruiking" Spark by posting on the IFT thread?

"I have been using the slump in the Spark share price as it crashed down from $5 towards $4 to increase my holding in that company"

Even though he knows the Spark pays out more in dividends than EPS?

[url]https://www.marketscreener.com/quote/stock/SPARK-NEW-ZEALAND-LIMITED-6492600/finances/[/url


I wasn't 'spruiking' anything. Toddy asked me a direct question and I answered. There is nothing more to see than that. And the position of the Spark board is that the earnings are on track to support the dividend, which 'market screener' is not telling you. But traditionally most Spark expenditure occurs in the first half, which is why the dividend and earnings for HY2014 appears out of whack.

If you have been following my investment case for Spark, you will know that it does not depend on the current level of dividends continuing anyway.

SNOOPY

[Ferg]

I admit my wording may be sub-optimal.
Hence the reason I say "Slow down Cowboy". Get the wording right and let's not invent definitions. You may not understand the ramifications of your posts for investors who aren't sufficiently versed in interpreting the intricacies of the AR or the various definitions of 'earnings'.


I contest that it is misinformation though.
Would you prefer disinformation? I gave you the benefit of doubt by using "mis". The wording was very misleading.


The point I was trying to make was that the earnings for associates follow different rules to the earnings of subsidiaries, which is why I put the word 'earnings' in quotation marks in my text that you quoted above. If I had meant 'earnings' to be interpreted as EBITDAF then I would have written EBITDAF. I did not do this.
The context of 'earnings' was EBITDAF given you made no such qualifications in your post other than the single quotes. My interpretation was you were mocking the derivation of earnings and the distinction between 'Earnings Before Interest, Tax, Depreciation etc' and NPAT was not clear in your post.


The overlaying problem is you might class that entire table in AR2024 p24 titled 'Proportionate EBITDAF' as 'misinformation'. Because it implies that you can sum that table and get the EBITDAF for Infratil, when in fact this is not true. The 'associate investment(s)' by Infratil, including CDC, cannot be consolidated in this way if accounting rules are followed.
This is also misinformation. Quote from IFT AR p24:

Proportionate EBITDAF is intended to show Infratil’s share of the operating earnings of the companies in which it invests. [snip] A reconciliation of Proportionate EBITDAF to net surplus after tax is presented in Infratil’s annual results presentation.
There is no need to double down and start redefining things or creating strawman arguments. IFT provided the intent for that table and it allows investors to see the underlying performance from each investment relative to each other and last year - one piece of misleading information I can see in that table is comparing full ownership of One NZ to partial ownership. However, Infratil did not imply one could sum these values to get the Infratil EBITDA given a) the quote I provided which gave the intent and a reference to a reconciliation and b) the table on the very next page..!

You have made a series of posts and subsequent revisions on the subject of CDC, which have been shown to be incorrect. This is not the way to prove the profitability of Spark's investment in similar ventures. Can I recommend you post about Spark in the Spark thread? And maybe once you have a finalised and informed view on CDC, then present that....rather than learning while you post what can be interpreted as misinformation.


Misinformation is “false information that is spread, regardless of intent to mislead.”

[Toddy]

trump hates wind and what happened increased the odds of him winning

https://www.theguardian.com/us-news/gallery/2024/jul/13/trump-pennsylvania-rally-shooting-in-pictures

Plenty of articles in the Guardian about their new left Government doing a Jacinda in the North Sea and banning oil and gas. Trumps current view is short sighted due to his sponsors in Texas with the $$$.

IFT has been through many different Governments in many countries over the years. You just work with them the best you can and carry on growing the business.

If Trump takes away renewable energy incentives then those that have already built infrastructure will have a competitive advantage.
Interesting times, does Trump listen to his mates like Eion Musk, or does he listen to his oil mates. I'm picking he will listen to both.

Either way, ift will carry on.

[Snoopy]

Hence the reason I say "Slow down Cowboy". Get the wording right and let's not invent definitions. You may not understand the ramifications of your posts for investors who aren't sufficiently versed in interpreting the intricacies of the AR or the various definitions of 'earnings'.

The context of 'earnings' was EBITDAF given you made no such qualifications in your post other than the single quotes. My interpretation was you were mocking the derivation of earnings and the distinction between 'Earnings Before Interest, Tax, Depreciation etc' and NPAT was not clear in your post.


The bit in bold you state as a fact is actually a matter of opinion. Your opinion, which you are entitled to. But it is not a definitive fact.

That post 3780 I wrote in just a few minutes. If you read the whole thing it is obvious the primary point of the post was about cash generation. If I had thought about it more, I probably would have defined what I meant by 'earnings', in quotation marks, first up in the first paragraph. The reason I started talking about EBITDAF straight off was because the table I was looking at was listing EBITDAF numbers. I wasn't going to go through each table item, convert each EBITDAF figure to NPAT and then worry about the role one off revaluations might play in NPAT. All these issues, in relation to CDC, have been canvassed on this thread before, over the last few days. And it has become apparent that most of the CDC profit recorded in the CDC books over FY2024, and reported on in the Infratil AR2024 p80, is from one off asset revaluations.

I accept that when I mentioned 'earnings' in quotation marks, some might have seen that as another way of saying EBITDAF. That is why I said I could have worded the post better. However, that is only one way of interpreting what I wrote. It is also equally valid to interpret EBITDAF and 'earnings' as meaning two different things. It seems very clear if you read the whole post that I was talking about the subject of cash generation. And separately it is also clear (though not mentioned in the post 3780) that the mere act of revaluing an asset upwards does not in itself generate cash.

As I said, the syntax of post 3780 could have been better. I accept some could have read it an alternative way and so misinformed themselves. But for those who have been following the discussion of the last few days, I don't believe the post was misinformation.

SNOOPY

[Ggcc]

I am not saying you are wrong Ggcc. But looking at AR2024 p24 this morning, and the EBITDAF from each Infratil division, I am surprised how dominant 'One NZ' has become (EBITDAF of $545.5m, - 63% of all Infratil EBITDAF). We now know that the second biggest EBITDAF provider, CDC, EBITDAF $140.8m, has supplied most of their 'earnings' via future data centre revaluations. So it is really only 'One NZ' and to a lesser extent Manawa Energy (EBITDAF $74.1m) and Wellington Airport (EBITDAF $70.7m) that are providing the cash that allows Infratil to survive.

Thus it is very clear that Spark and Infratil (via One NZ) are deadly competitors in the same telecommunications space. The big difference being that Infratil takes their 'One NZ' cash profits and reinvests them in various growth prospects outside of telecommunications, whereas Spark takes their profits and gives them straight back to shareholders to 'do what they will' with. So the real comparison for the future is not Infratil verses Spark. It is really Infratil verses Spark PLUS the results of whatever Spark shareholders choose to do with their dividend stream.

If it was a straight fight between 'Spark' and 'One NZ' I would still go for Spark as the provider of the more complete telecommunications packages. I do acknowledge 'One NZs' Jason Paris as a strong CEO though, even though he isn't quite as good as Spark's Jolie Hodson ;). In fact before my recent Spark buy up, my plan was to wait for the 'One NZ' float, then buy Spark on any market weakness of Spark caused by institutions having to rebalance their portfolios into a newly floated 'One NZ' !

SNOOPY
If you were to just compare One to Spark, I too would choose Spark, as One is still trying to better their services and that in itself will be a few year struggle, but they will get there. Ift play the long game, I am happy to be part of their journey.

You always make more money selling businesses than running businesses. When IFT businesses are near to fully matured you will IFT flick them off or use them for cashflow.

[Toddy]

Has Snoopy driven down the IFT share price today.

Tough day at the office!

[huxley]

Has Snoopy driven down the IFT share price today.

Tough day at the office!

And SPK is up today! This is surely market manipulation, someone alert the FMA ;)

[Snoopy]

You have made a series of posts and subsequent revisions on the subject of CDC, which have been shown to be incorrect.


The process is called 'iterative optimisation'. Take some information that you do know. make some educated guesses about what you don't know. Put all the inputs into the formula. Crank the handle and see if something sensible comes out. If not, revise your guesses and crank the handle again. Rinse and repeat until you are happy with the numbers you are generating. I am not going to apologise for taking seven iterations to get to a point I am happy with. Particularly when the whole idea of being 'correct' is an illusion anyway. We can't be 'correct' until we have full access to the CDC accounts, which Infratil is under no obligation to supply us. So 'best guess' it is.



This is not the way to prove the profitability of Spark's investment in similar ventures. Can I recommend you post about Spark in the Spark thread?


Already done in June:
https://www.sharetrader.co.nz/showthread.php?9630-SPK-Spark-NZ-(TELCO)&p=1058688&viewfull=1#post1058688
https://www.sharetrader.co.nz/showthread.php?9630-SPK-Spark-NZ-(TELCO)&p=1058788&viewfull=1#post1058788



And maybe once you have a finalised and informed view on CDC, then present that....rather than learning while you post what can be interpreted as misinformation.


All sources are open when looking for clues. And certainly looking at the profitability of Spark datacentres offers some clues to the numbers that might be behind CDC. It is called 'cross fertilization of ideas'. If I present information on CDC titled as an 'attenpt' , I don't see why anyone would take such a post as definitive.

SNOOPY

[LaserEyeKiwi]

Has Snoopy driven down the IFT share price today.

Tough day at the office!

Like seemingly almost every capital raise, the share price will probably hit the discounted offer price once retail investors can start trading their allocations.

[Baa_Baa]

In the many years that I've been here, and with the greatest respect I have for Snoopy's analysis ... especially the Buffet tests, I have never seen him work up a flawed and evolving derogatory scenario, on record, with so many pullbacks and corrections for a competitor of a company that he does hold and has held for a long time.

Covid brain? Who knows, but it's questioning a very long standing confidence in his current and future analysis.

[Snoopy]

In the many years that I've been here, and with the greatest respect I have for Snoopy's analysis ... especially the Buffet tests, I have never seen him work up a flawed and evolving derogatory scenario, on record, with so many pullbacks and corrections for a competitor of a company that he does hold and has held for a long time.


What derogatory scenario? Have I told people to not invest in Infratil? No. Yes I have said that CDC is not making much money from operations. But I have explained the background behind that, I don't have a problem with it, and I don't necessarily see that as a long term negative. I just want to see some of the numbers that make up that lofty CDC valuation. A perfectly reasonable request I would have thought. But some existing shareholders seem to have taken that request as a slap in the face.

Furthermore the fact I hold shares in Spark has nothing to do with the impression that you have where you think I am disparaging Infratil. I would be quite happy to hold both SPK and IFT if I can make my own investment case for IFT stand up. If you think my analysis on CDC is flawed,
https://www.sharetrader.co.nz/showthread.php?1360-IFT-Infratil&p=1060215&viewfull=1#post1060215
https://www.sharetrader.co.nz/showthread.php?1360-IFT-Infratil&p=1059326&viewfull=1#post1059326
https://www.sharetrader.co.nz/showthread.php?1360-IFT-Infratil&p=1059815&viewfull=1#post1059815

then please post your own alternative one, or a least point out where you think I have gone wrong.

SNOOPY

[kiora]

Looking at past performance is one thing but for IFT investors now future earnings and compounding returns are more important

https://infratil.com/for-investors/our-dividends-and-performance/

So past peformance was:
A post-tax return of 18.7% a year over 30 years. In contrast, the NZX50 delivered a return of 7.4% a year over the same period.
A post-tax return of 22.0% per year over last 10 years.

So compounding returns have increased over last 10 years

So IFT management are getting
"luckier"?
+/- They are getting better?
+/- The investing environment is improving?

I only want to invest in companies that have compounding returns in the future.
Because then timing the market doesn't matter.
Because time in the market is far more important and I'm only looking to keep owning the shares in the company.
I can set & forget and ignore any noise.

So what will future earnings look like?

I'm picking that

There is a pipline of development prepared
The investment opportunities have rarely been this good
That there is little capital constraint
The investing environment will stay the same for the immediate future.
That the IFT management will be as good if not better than it has been
That investors will get "luckier" in the immediate future

[warthog]

What derogatory scenario? Have I told people to not invest in Infratil? No. Yes I have said that CDC is not making much money from operations. But I have explained the background behind that, ...
SNOOPY

They're emotional, Snoopy. They're here to have their decisions, views and perspectives affirmed, not challenged, questioned or analysed. We saw with the hoax how for 80%+ of people there is basically no critical thinking or independent assessment ability present. They follow the crowd and believe in the wisdom of their cult, and react emotionally when it is called into question.

Disc. hold IFT. :t_up:

[Goose]

Just checked Link Market Services to see how my allocation went - seems they have used an interesting method of scaling. I thought that they might take some oversubscriptions so I applied for 1.33 x my entitlement; received 1.086 x my entitlement. I imagine there is going to be varying results for different holders.

[tango]

My allocation worked out at 146.3 shares per 1000 shares I own

Which works out at 1.076 of my entitlement?

I'm not sure I understand that
The notice of oversubscription says "Infratil is accepting an additional NZ$125 million [1][2] of subscriptions, bringing the total amount raised under the Retail Offer to NZ$275 million"

I thought I would get 275/150 of my allocation
I guess my maths sucks?
Can someone tell me where I'm going wrong

I thought the number of shares allocated would be in the same proportion
https://infratil.com/news/retail-offer-oversubscribed2/

[777]

Just checked Link Market Services to see how my allocation went - seems they have used an interesting method of scaling. I thought that they might take some oversubscriptions so I applied for 1.33 x my entitlement; received 1.086 x my entitlement. I imagine there is going to be varying results for different holders.

Got 1.088 x entitlement. Had applied for 1.64 x entitlement.

[Toddy]

Snoopy.

Keep up the good work. Working through your model as you build it and asking questions and debating adds value to everyone.

It's good to look at the micro environment, but can get frustrating sometimes having to build your assumptions from numbers disclosed from the accounts.

Either way, a great hobby and if you can make some money, avoid some risks and share your thoughts then all good.

[LaserEyeKiwi]

I don’t have any illusions about CDC - I fully expect when interest rates start falling and equity valuations consequently rise that IFT will attempt to exit CDC via a ASX listing.

[Toddy]

I don’t have any illusions about CDC - I fully expect when interest rates start falling and equity valuations consequently rise that IFT will attempt to exit CDC via a ASX listing.

I think that Retire Australia, Wellington Airport will be ahead of any thoughts of exiting CDC. Even a One NZ float.
Data centres are nowhere near mature in the investment cycle.

Either way, there are many exciting options available in the future for IFT to realise mature investments.

In the meantime, let's see where this new leverage and the 10 billion dollar club takes us when interest rates start to fall.

[Bjauck]

I think that Retire Australia, Wellington Airport will be ahead of any thoughts of exiting CDC. Even a One NZ float.
Data centres are nowhere near mature in the investment cycle.

Either way, there are many exciting options available in the future for IFT to realise mature investments.

In the meantime, let's see where this new leverage and the 10 billion dollar club takes us when interest rates start to fall. They have only just had a capital raising for it. Even with MetLifeCare they were invested for 3.5 years (and had an annualised return of 15.5% for that investment.) I trust they will make the right call over an exit strategy, when the time is right, whether by a Z Energy type listing, or other means.

[Bev73]

Not your maths, Tango. Link seems to have their own allocation system which differs from the advised pro rata allocation.

[newtrader]

Got 1.088 x entitlement. Had applied for 1.64 x entitlement.

Same here, got 1.0881 x and applied for 1.84 x entitlement.

[Sideshow Bob]

Applied through Sharesies, so still waiting to find out.

Not a criticism - imagine it takes a little while to work through and update punters.

[warthog]

Got 1.088 x entitlement. Had applied for 1.64 x entitlement.

Applied for 2x entitlement, received 1.088x entitlement.

[Jaa]

So IFT management are getting
"luckier"?
+/- They are getting better?
+/- The investing environment is improving?

Or they are taking larger risks?

[tango]

Not your maths, Tango. Link seems to have their own allocation system which differs from the advised pro rata allocation.

Thanks. I was starting to question myself.
Strange pro rata system

[Snoopy]

Those clever people at Goodman plan to just convert their Aus logistical warehouses into data (warehouse) centres, either themselves or by offering ready to build sites complete with power and internet connectivity to the hyperscalers. How do you compete with that?


I don't follow Goodman in Australia. But I am surprised they would retrofit, or even bowl and rebuild. a former logistical distribution site into into a datacentre. I don't know what the zoning restrictions are like in the larger Australian cities. I presume they are less restrictive than Auckland. From what I can gather, the siting of a logistics centre is quite important, to minimise those 'source to target' incoming and outgoing freight delivery times. But a datacentre can probably be anywhere, up to 50km away from 'communications central'. That means that if Goodmans have already optimised their prime sites around logistics, it would be the logistics tenant that would logically pay a higher price for the use of that land/building. The only reason I could see Goodman using this 'alternative tenant' tactic, is to try and squeeze a bit more rent out of the logistics tenants, by telling them data centre operators are 'sniffing around' and would be keen to take over the tenant's space.

SNOOPY

[777]

Refunds have been paid today.

[kiora]

Or they are taking larger risks?

No I don't think so,do you?

IFT Investment Risk

I venture IFT investment risk is far less than the majority of companies on NZX ?

IFT assets are spread across different thematics with Infratil businesses operating in 17 countries across Australasia, North America, Asia, Europe and the United Kingdom.
Digital 62%
CDC,One NZ,KAO Data,Forty South,Clearvision
Renewables 22%
Manawa Energy,Longroad Energy,Gurin Energy,Galileo,Mint Energy
Healthcare 11%
Retire Australia,QScan,Auckland Radiography
Airports 4%
Wellington

All IFT businesses share a common trait: they deliver essential services to the communities they serve.They are not cyclical

All stakeholders are well aligned
Management,shareholders,customers

Capital Management & Risk

The use of debt is bound by Infratil’s policy of maintaining credit metrics that are broadly consistent with an Investment Grade Credit Rating (Infratil is not credit rated) and with maintaining availability of funds for investment purposes.
The majority of the debt is held in the subsidiaries.
Even before the capital raising equity was 80%
With net bank and dated bonds and perpetual bonds at 20% in total

To manage foreign currency risk, Infratil aims to ensure cash flow certainty by hedging once foreign currency cash flows are sufficiently certain, and by seeking to offset exposures whenever possible.

The majority of the future cashflow is secured through long term contracts before funds are invested

In summary
Risk/return +++++

[Toddy]

Great post. And hopefully they are disposed of their riskiest asset in the near future. Wellington Airport.

[Jaa]

I don't follow Goodman in Australia. But I am surprised they would retrofit, or even bowl and rebuild. a former logistical distribution site into into a datacentre. I don't know what the zoning restrictions are like in the larger Australian cities. I presume they are less restrictive than Auckland. From what I can gather, the siting of a logistics centre is quite important, to minimise those 'source to target' incoming and outgoing freight delivery times. But a datacentre can probably be anywhere, up to 50km away from 'communications central'. That means that if Goodmans have already optimised their prime sites around logistics, it would be the logistics tenant that would logically pay a higher price for the use of that land/building. The only reason I could see Goodman using this 'alternative tenant' tactic, is to try and squeeze a bit more rent out of the logistics tenants, by telling them data centre operators are 'sniffing around' and would be keen to take over the tenant's space.

SNOOPY

That Livewire link (https://www.livewiremarkets.com/wires/wondering-how-to-invest-in-ai-take-a-look-at-asx-data-centres) had some details Snoopy. More about using their existing land bank and developer expertise/contacts than converting existing sites.


Goodman has acquired land and pre-arranged council approvals and power connectivity it can use to develop its own data centres or sell as a ready parcel to big tech.

The company’s current data centre pipeline opportunity is around $20 billion, but the market is currently pricing “less than half of this potential opportunity at ~A$9 billion”.

The Goodman website has more details (https://www.goodman.com/our-properties/data-centres), they have developed way more capacity than CDC for example.


Our global power bank of 4.3GW includes completed facilities, secured power and potential data centre projects across 12 major international cities. This has been built up over time through our expertise in securing land, planning and power in highly sought after locations in major global cities.

Goodman has delivered 0.6 GW of data centres and powered sites globally for its hyperscale and co-location customers.

Goodman's buy, prepare, build, sell to the hyperscalers strategy is far less risky than CDC and Kao Data's build to own strategy.

[Jaa]

No I don't think so,do you?

I do.

Infratil has always owned a mix of assets that as you state does lower risk. So that is not new.

What is new is that a significant chunk of their market cap is now in a hot boom and bust sector that is clearly in bubble territory. Data centres are simply not that rare or hard to build compared to ports, airports, hydro power or even radiologists. Outside of Canberra I do not believe they have a moat.

Infratil face competitors far bigger than themselves, with a much lower cost of capital and far greater domain knowledge in an industry with fast changing technology. That is all new for Infratil and thus it has to be riskier.

Maybe you missed Wall Street's scepticism in the article (https://www.marketwatch.com/story/wall-street-is-becoming-more-skeptical-of-artificial-intelligence-hype-helping-to-power-stocks-983aa5ca) I shared where Barclay's state all the data centre construction currently underway is enough to "power the existing internet, plus 12,000 new applications with the user base and input demands of ChatGPT."

[Jaa]

Great post. And hopefully they are disposed of their riskiest asset in the near future. Wellington Airport.

Why would they sell their best asset?

They should sell CDC before the bubble bursts.

I also have no idea why they are throwing a lazy $US100m at "IoT, Big Data, and Security" venture fund, Clearvision Ventures (https://www.clearvisionventures.com/). There goes half the money from the retail offer. Investors are paying fees on top of fees on that one. The only investment they disclose, Chargepoint Holdings (https://www.google.com/finance/quote/CHPT:NYSE?window=5Y) has done terribly. Must be cool to visit Sand Hill Road and chit chat though.

[kiora]

I do.

Infratil has always owned a mix of assets that as you state does lower risk. So that is not new.

What is new is that a significant chunk of their market cap is now in a hot boom and bust sector that is clearly in bubble territory. Data centres are simply not that rare or hard to build compared to ports, airports, hydro power or even radiologists. Outside of Canberra I do not believe they have a moat.

Infratil face competitors far bigger than themselves, with a much lower cost of capital and far greater domain knowledge in an industry with fast changing technology. That is all new for Infratil and thus it has to be riskier.

Maybe you missed Wall Street's scepticism in the article (https://www.marketwatch.com/story/wall-street-is-becoming-more-skeptical-of-artificial-intelligence-hype-helping-to-power-stocks-983aa5ca) I shared where Barclay's state all the data centre construction currently underway is enough to "power the existing internet, plus 12,000 new applications with the user base and input demands of ChatGPT."

Good to hear some contra thoughts Jaa

For what its worth, I have been investing in shares since early 1980's & lived through the crashes of '87,dot com,global financial crisis,2022 covid drop etc and I'm well aware of risks caused by bubbles.Can anyone predict them?
After every crash there is a recovery.
One thing I've learned is to stick to proven performers and there are risks around selling too early or too late & buying too early too late.

"Save like a pessimist invest like an optimist'

I'm always interested in investing in companies in NZ that reward their shareholders with higher compounding returns than IFT has over 30 years.

Do you know of any?

OR does an investor need to be a "sharp" trader or invest offshore?

[Snoopy]

That Livewire link (https://www.livewiremarkets.com/wires/wondering-how-to-invest-in-ai-take-a-look-at-asx-data-centres) had some details Snoopy. More about using their existing land bank and developer expertise/contacts than converting existing sites.


Thanks for the link Jaa. There is a graph in the link titled 'Exabytes of data created (Created in the cloud vs non-cloud)'. I think that is a global projection rather than Australian one, although the text doesn't make that entirely clear. But something doesn't look right about it to me. The graph does not tie in with the text

Why is the graph illustrating 'created in the cloud' instead of 'stored in the cloud'? Are the two meant to be synonymous? If we have something 'created in the cloud', say via a SAAS application, are we talking about the computing power needed to run such an application in a data centre? 'Created in the cloud' isn't mentioned in the text. The text talks about storage. So why illustrate the prospects of 'cloud storage' (concept 1) by graphing data 'created in the cloud' (concept 2)?

Then there is the bold header statement in the article that says: Cloud + AI = Storage (and lots of it). Now traditionally if you have a computer system in your office then that is 'non-cloud' whereas stuff stored over the internet on a server somewhere else is 'cloud'. But the header in bold would almost suggest that in this instance 'non-cloud' is referring to AI in this context? A later comment in the text when talking about cloud is that:

"Certainly, cloud storage is the mainstay, representing around 60% of global centre demand. AI is likely to be around 25% of the mix with the remaining portion largely taken up by data sovereignty. Data sovereignty is perhaps the least known of the three but is arguably the most important. It is tasked with protecting data from “external interference from foreign states and third parties."

So this would suggest that AI is indeed part of cloud being talked about in the article. This is saying: Storage (60%) + AI (25%) + Data Sovereignty (15%) = Cloud Capacity (100%)

But if that is what the article is talking about, it is in direct contradiction to the header: "Cloud + AI = Storage (and lots of it!)". What is going on here?

Next, the graph has split 'Storage' into 'Cloud' + 'Non Cloud'.

My reading of that graph is that 'data created' will increase from a total of 129,361 Exabytes, made up of Cloud Created Data 30,000 and Non-cloud Created Data 99,361 (2023) to a total of 291,122 exabytes Cloud Created Data 100,000 and Non-cloud Created Data 191,122 (2027). I calculate the respective growth rates as follows:

Cloud Created Data: 30,000(1+g)^4=100,000 => (1+g)^4=3.333 => (1+g)=1.35 => g=35%
Non-cloud Created Data: 99,361(1+g)^4=191,277 => (1+g)^4=1.925 => (1+g)=1.18 => g=18%
Total Created Data: 129,361(1+g)^4=291,122 => (1+g)^4=2.250 => (1+g)= 1.22 => g=22%

The writer of the article then says
"Certainly, cloud storage is the mainstay, representing around 60% of global centre demand."

But the graph shows the exact opposite of that. It looks to me that although demand for cloud created data is growing faster, even by 2027 it will only amount to 30% of all data stored, the remaining 70% being 'non-cloud'. So it looks to me as though despite the huge growth of data centres, still by far the largest opportunity is to sell the computing power for creating data 'off cloud'. Which then creates an opportunity for that data to get stored 'on cloud' (or does it)?

Jaa I have a feeling you are a lot more au fait with this datacentre stuff than me. The article seems a bit fast and loose with definitions. The net result being I can't understand the article. What on earth are they trying to say? I get the overall message that 'investing in data centres is the greatest opportunity'. But then the content in the graph in the article appears to not support that proposition.

Can you tech-translate for me?

SNOOPY

[Snow Leopard]

....
I also have no idea why they are throwing a lazy $US100m at "IoT, Big Data, and Security" venture fund, Clearvision Ventures (https://www.clearvisionventures.com/). There goes half the money from the retail offer. Investors are paying fees on top of fees on that one. The only investment they disclose, Chargepoint Holdings (https://www.google.com/finance/quote/CHPT:NYSE?window=5Y) has done terribly. Must be cool to visit Sand Hill Road and chit chat though.

From the Infratil Annual Report:

"The strategic objective of the investment is to help Infratil's businesses identify and engage with technology changes that will impact their activities."

The 50% gain on funds employed so far is just a bonus :mellow:

Now if you thought that AI would be useful for something it would be digging up the details on private venture funds but it turns out AI is as useless at that as it is most other stuff.

But I do know that Clearvision have made at least 20 investments and I am pretty confident that they made a profit when they exited Chargepoint just over 4 years ago.

[fastbike]

Refunds have been paid today.
I got 1.077 of the allocation 136/1000 in the prospectus, however the small amount of over subscription has been credited back today, so no complaints.
Apparently my average purchase price is NZD 5.646, so I appear to have been fleeced :)

[kiora]

I applied for less than the 136/1000 otherwise the RC would have been savaged & got 100% of applied + $3.25 refund.
I see the Morison shareholding has been diluted down as well.

[huxley]

I applied for less than the 136/1000 otherwise the RC would have been savaged & got 100% of applied + $3.25 refund.
I see the Morison shareholding has been diluted down as well.

- $3.25 right? They don’t refund amounts under $5.00

[kiora]

- $3.25 right? They don’t refund amounts under $5.00

You are right Huxley.I didn't read the fine print & the $3.25 isn't in the bank account.

"2 In accordance with the Offer Document, your refund will be issued within five business days following the Allotment Date. Any amount lesser than $5 due to rounding or scaling will be retained by Infratil."

[Jaa]

"The strategic objective of the investment is to help Infratil's businesses identify and engage with technology changes that will impact their activities."

I was trying to be glib Mr Leopard... but gee identify and engage sure does sound like expensive chit chat.

The reality distortion field of venture firms mean they only disclose profitable exits. IFT did post bubble bingo winning news on Linkedin though, I bet most shareholders have no idea that IFT is back investing in buses. Guess with your views on AI you won't be letting it drive the kids to school?


One of the ways Infratil seeks to identify and engage with technological change and disruption is through its investment in Clearvision Ventures. Clearvision invests out of Silicon Valley in early-stage companies, focusing on innovations in IoT, Big Data, Security Technology, and tech-enabled sustainable infrastructure.

One of these investments is Zūm. Zūm provides modern transportation solutions aimed at transforming school transportation.

..

Zūm is providing a fleet of 74 electric school buses and bidirectional chargers in Oakland, managed through its AI-enabled technology platform. The all-EV fleet will transport students sustainably and play a critical dual role as a Virtual Power Plant, giving 2.1 gigawatt hours of energy back to the grid annually.

While Infratil’s look-through investment in Zūm is modest, it is an investment that provides valuable access to the thinking and technology driving an emerging class of tech-enabled sustainable infrastructure.

https://www.linkedin.com/feed/update/urn:li:activity:7200175729899130880/

I also note that the founder of Clearview Ventures, Dan Ahn (https://www.linkedin.com/in/daniel-ahn-2435529/) runs an identical looking VC fund called Envision Ventures out of the same expensive office on Sand Hill Road. Wonder which fund gets the best deals? See if you can spot the difference:

https://www.clearvisionventures.com/
https://envisionvc.com/

[Jaa]

Thanks for the link Jaa. There is a graph in the link titled 'Exabytes of data created (Created in the cloud vs non-cloud)'. I think that is a global projection rather than Australian one, although the text doesn't make that entirely clear. But something doesn't look right about it to me. The graph does not tie in with the text

But the graph shows the exact opposite of that. It looks to me that although demand for cloud created data is growing faster, even by 2027 it will only amount to 30% of all data stored, the remaining 70% being 'non-cloud'. So it looks to me as though despite the huge growth of data centres, still by far the largest opportunity is to sell the computing power for creating data 'off cloud'. Which then creates an opportunity for that data to get stored 'on cloud' (or does it)?

Jaa I have a feeling you are a lot more au fait with this datacentre stuff than me. The article seems a bit fast and loose with definitions. The net result being I can't understand the article. What on earth are they trying to say? I get the overall message that 'investing in data centres is the greatest opportunity'. But then the content in the graph in the article appears to not support that proposition.

Can you tech-translate for me?

SNOOPY

I didn't even look at the chart and now I have, neither should you. No one really knows what the growth in data centre demand will be so there isn't much point in analysing it to death.

Assume that data growth will continue and humanity will find more things to do with computing power. Moore's Law means this doesn't necessarily require more data centres as processors and storage are constantly becoming more powerful, efficient and cheaper. To give you some idea, someone tried to prove you could run Twitter on a single modern server (https://thume.ca/2023/01/02/one-machine-twitter/). Likewise software, GTP 4o is much more efficient than GTP 4 for example.

There is a nascent but growing movement away from Cloud due to its increasing complexity and opaque and ever increasing bills to owning hardware again via colocation which could be beneficial for the likes of CDC. Basecamp, one of the first SaaS companies and considered thought leaders, reduced their cloud bill from $US3.2m/yr to a one off buy of $US600k in modern hardware and $US7m in expected savings over 5 years and have declared hardware is fun again (https://world.hey.com/dhh/hardware-is-fun-again-b819d0b4).

This interplay between hardware and software is very hard to predict and thus so is data centre demand. Very different from IFT's traditional infrastructure investments.

[Jaa]

I'm always interested in investing in companies in NZ that reward their shareholders with higher compounding returns than IFT has over 30 years.

Do you know of any?

IFT have done well Kiora but they are not the only option.

Using the share checker in Sharesight, which includes dividends and capital gain, for the max 20 year period, a few shares I checked beat IFT's 11.85% p.a total return over the last 20 years. They are FPH, MFT, RYM and EBO. POT and AIA were both close too, with 11.19% and 9.8% returns respectively.

Obviously past returns don't guarantee future performance which is why you should keep an eye on your investments.

[huxley]

I for one look forward to reading the the comments about what constitutes infrastructure when the Console Connect transaction goes through ;)

[777]

IFT have done well Kiora but they are not the only option.

Using the share checker in Sharesight, which includes dividends and capital gain, for the max 20 year period, a few shares I checked beat IFT's 11.85% p.a total return over the last 20 years. They are FPH, MFT, RYM and EBO. POT and AIA were both close too, with 11.19% and 9.8% returns respectively.

Obviously past returns don't guarantee future performance which is why you should keep an eye on your investments.

Interesting that those companies are amongst the largest holdings in KFL along with IFT itself.

[kiora]

IFT have done well Kiora but they are not the only option.

Using the share checker in Sharesight, which includes dividends and capital gain, for the max 20 year period, a few shares I checked beat IFT's 11.85% p.a total return over the last 20 years. They are FPH, MFT, RYM and EBO. POT and AIA were both close too, with 11.19% and 9.8% returns respectively.

Obviously past returns don't guarantee future performance which is why you should keep an eye on your investments.
Yes I agree investments need to be kept an eye on

Is Sharesight accurate???

I forgot I ever loaded my portfolio on Sharesight in 2016 but I've just logged on a checked IFT.

Its weird?
IFT returns are showing as 34.65% return/annum ! ,27.9% capital gain & 7.27% pa dividends ?

That isn't right is it?

VGL that I sold around that time showing as -1,3% pa return if I held
Trilogy that was sold back then showing as -0.86% pa return if I held
SKL that was sold around then showing as 37.87% pa return if I held

???

[Jaa]

I for one look forward to reading the the comments about what constitutes infrastructure when the Console Connect transaction goes through ;)

Ha! I was going to save Console Connect for another day but since you asked...

I doubt anyone got my niche reference to Telstra's billion dollar disaster with the Reach bailout in 2001-04 (https://www.smh.com.au/business/telstra-faces-big-bail-out-at-reach-20040216-gdid3v.html) the other day but you can imagine my shock when I kept digging the next day and learned IFT actually want to buy some of the very same assets! At a similar high point in the cycle, from and in a joint venture with the same partner, PCCW. Deja vu to the max! :eek2:

At $US160m for 80%, Console Connect looks cheap to me. Wonder how many of the undersea cables they still own? It sure is riskier than IFT's historical investments including CDC. Not just because the product/industry are fast changing and cyclical but the HK location. What company wants the CCP being able to snoop on their data centre and fibre connections?

Do you know why the deal hasn't closed Huxley? It was announced over a year ago (https://www.nzx.com/announcements/414461)?

[huxley]

I think they’ve mentioned waiting for regulatory approvals and expect it to close calendar 2024

[maclir]

I think they’ve mentioned waiting for regulatory approvals and expect it to close calendar 2024

Just the dozen countries! Q3 they reckon.

[kiora]

Working through Sharesight compounding since 2004

Spark +3.3% Never owned although I did have Telstra after their float for a couple of years (+3.07% comp now)
MFT +21.54% Picked up small parcel for a Trust
SKL +8.91% Brought @ 50 c at capital raising,sold when earnings started to decline
EBO + 13.84%
AIA + 9.74% Initial float,sold 2018 after reading a book on pandemics

etc

That is a great sight thanks Jaa

[Jaa]

Working through Sharesight compounding since 2004

Spark +3.3% Never owned although I did have Telstra after their float for a couple of years (+3.07% comp now)
MFT +21.54% Picked up small parcel for a Trust
SKL +8.91% Brought @ 50 c at capital raising,sold when earnings started to decline
EBO + 13.84%
AIA + 9.74% Initial float,sold 2018 after reading a book on pandemics

etc

That is a great sight thanks Jaa

You are welcome Kiaora, Sharesight is great, tracking against the benchmarks keeps you honest as an investor. A Kiwi success story too.

Talking about success, I found another 20 year winner, Southport at 11.24%. Why bother with IFT's high finance, capital raises and wheeling and dealing when you could just own a boring NZ port huh?

[nizzy]

:) I like boring.

[Toddy]

IFT sold it's stake in POT.

What return did they miss out on?

[Snow Leopard]

Oz election commision moves from NextDC to CDC (https://www.itnews.com.au/news/australian-electoral-commission-starts-moving-out-of-nextdc-609814)

The market gives with one hand and takes away with the other :(

[Jaa]

IFT sold it's stake in POT.

What return did they miss out on?

IFT sold POT down over time, so would take a lot of work to calculate, they timed a sale well in 2021 but it didn't all go smoothly. From 2002:


Infratil is selling down its stake in Port of Tauranga, saying it needs to free more capital for new investments such as overseas airports.

Infratil trades sea for air (https://www.nzherald.co.nz/business/infratil-trades-sea-for-air/ZQSWDR4SCSQDLUAY7X7MPQ2US4/)

Probably a lesson there.

[kiora]

You are welcome Kiaora, Sharesight is great, tracking against the benchmarks keeps you honest as an investor. A Kiwi success story too.

Talking about success, I found another 20 year winner, Southport at 11.24%. Why bother with IFT's high finance, capital raises and wheeling and dealing when you could just own a boring NZ port huh?

Thanks Jaa
I'll definately look at Sharesight a lot more.Very Useful

I did own POT for a while but earnings growth wasn't great.Looks like been pretty OK returns since
Same NPT,sold at start of Pandemic when they ere building a new wharf

Glad I did,1 % compounding !

[kiora]

IFT sold it's stake in POT.

What return did they miss out on?

13 % compounding?

[kiora]

Oz election commision moves from NextDC to CDC (https://www.itnews.com.au/news/australian-electoral-commission-starts-moving-out-of-nextdc-609814)

The market gives with one hand and takes away with the other :(

Makes sense?
National Data sovereignty & security? :)

[Snoopy]

I didn't even look at the chart and now I have, neither should you. No one really knows what the growth in data centre demand will be so there isn't much point in analysing it to death.


I think there is a middle ground between 'analysing the demand for data centres to death' and 'zero analysis' though.

I get the impression that Carl Capulingua who wrote the livewire article "Wondering how to Invest in AI? Take a look at ASX data centres"
https://www.livewiremarkets.com/wires/wondering-how-to-invest-in-ai-take-a-look-at-asx-data-centres

had already decided that demand for datacentres would grow in the future exponentially. So he just cast around for a graph showing 'exponential growth of data' and put that in his article. However, he somehow failed to notice that the graph instead showed where data was being created, not where it was stored. And it was clear that despite data creation at datacentres growing exponentially, it was still well behind data creation not in data centres that was also growing exponentially. So the graph did not necessarily show a huge increase of demand for physical datacentre footprints. And this alternative view is supported by another reason you mentioned Jaa:



Assume that data growth will continue and humanity will find more things to do with computing power. Moore's Law means this doesn't necessarily require more data centres as processors and storage are constantly becoming more powerful, efficient and cheaper. To give you some idea, someone tried to prove you could run Twitter on a single modern server (https://thume.ca/2023/01/02/one-machine-twitter/). Likewise software, GTP 4o is much more efficient than GTP 4 for example.


Improvements in processing and storage can keep occurring, without constantly increasing the space to house such improving equipment. So it looks to me as though Carl Capulingua put zero effort into researching the industry background in his article, and he didn't even realise that he put up a graph that if anything was evidence against his biased self created opinion of 'demand for the footprint of physical data centres always growing.'



There is a nascent but growing movement away from Cloud due to its increasing complexity and opaque and ever increasing bills to owning hardware again via colocation which could be beneficial for the likes of CDC.


Now it looks like you have confused yourself Jaa. 'Private cloud' where a company puts their own equipment into a dedicated remote data centre (this appears to be the model operated by CDC) is still 'cloud', is it not?



Basecamp, one of the first SaaS companies and considered thought leaders, reduced their cloud bill from $US3.2m/yr to a one off buy of $US600k in modern hardware and $US7m in expected savings over 5 years and have declared hardware is fun again (https://world.hey.com/dhh/hardware-is-fun-again-b819d0b4).


Basecamp is an example of a company uprating the hardware on their private cloud in a 'single rack server'.
https://world.hey.com/dhh/hardware-is-fun-again-b819d0b4

At least that is how I read the article at first (good for the likes of CDC). But I suppose it could equally read that Basecamp could operate their own small server on their own premises away from any data centre, bought for $600k?



This interplay between hardware and software is very hard to predict and thus so is data centre demand. Very different from IFT's traditional infrastructure investments.


Is the interplay between hardware and software another way of looking at the shifting balance between 'data storage' and 'data creation'? As you can see, I am still trying to get my head around what 'data centres' are really about.

SNOOPY

[Snoopy]

Oz election commision moves from NextDC to CDC (https://www.itnews.com.au/news/australian-electoral-commission-starts-moving-out-of-nextdc-609814)

The market gives with one hand and takes away with the other :(

You have shares in both Infratil and NextDC?

From the referenced article:
"The AEC spokesperson said the timing of the data centre migration is "all about ensuring our IT election ready systems remain safe, stable and secure.” "

That sounds like NextDC have not updated their security protocols, and they have old unstable equipment? What were they thinking at NextDC?

"CDC Data Centres won the contract through a competitive tender to participants of a Digital Transformation Agency-assembled panel."

"The AEC spokesperson told iTnews that it is “taking the opportunity” presented by the move to a new facility to also “downsize” its on-premises infrastructure. Its data centre hosts core WAN infrastructure, unspecified “internal business systems” and election delivery services. The intent is to make “further investments into cloud capabilities” as the AEC shrinks its data centre space requirements."

This sounds like the AEC are moving more of their 'on premesis' computing equipment into the (private) cloud. But furthermore as computing power continues to increase and computer processing equipment shrinks in size, AEC are going to put more computer grunt into the same rack space. Thus they are planning to increase their computing power without the rack space rent going up - very clever. This is a marketing advantage of 'private cloud' (seems to be the CDC model) that I had not considered before.

SNOOPY

[Snow Leopard]

You have shares in both Infratil and NextDC?
....

I have been in & out of Infratil for 20 years and first bought into NextDC 11 years ago (https://www.sharetrader.co.nz/showthread.php?9180-NXT-amp-AJD-NEXTDC-amp-Asia-Pacific-Data&p=407498&viewfull=1#post407498).
I have a strongish IT bias across my investments at present.

Like everything technological, the only constant with Data Centres is change, I just keep an eye on the price chart and check the 'future fundamentals' when it is not going up. :)

[kiora]

I have been in & out of Infratil for 20 years and first bought into NextDC 11 years ago (https://www.sharetrader.co.nz/showthread.php?9180-NXT-amp-AJD-NEXTDC-amp-Asia-Pacific-Data&p=407498&viewfull=1#post407498).
I have a strongish IT bias across my investments at present.

Like everything technological, the only constant with Data Centres is change, I just keep an eye on the price chart and check the 'future fundamentals' when it is not going up. :)

:) Just playing with the toy.NXT 17.53% compounding since 2010

[kiora]

IFT have done well Kiora but they are not the only option.

Using the share checker in Sharesight, which includes dividends and capital gain, for the max 20 year period, a few shares I checked beat IFT's 11.85% p.a total return over the last 20 years. They are FPH, MFT, RYM and EBO. POT and AIA were both close too, with 11.19% and 9.8% returns respectively.

Obviously past returns don't guarantee future performance which is why you should keep an eye on your investments.

Thats interesting Jaa.I'm always interested in better returns than 12% compounding.
I'm aiming for 15% compounding.

Any ideas on investment strategies other than buy low,sell high?

What have your investment returns been over last say 14/20 years?

[alokdhir]

USG and MFT stand out for phenomenal LT returns vs IFT ...USG has the comfort of low cost fund thus safer then single stock risk ...otherwise MFT beats IFT hands down on all LT time frames and both NZX stocks

[huxley]

I for one look forward to reading the the comments about what constitutes infrastructure when the Console Connect transaction goes through ;)

Okay, recent events suggest it’s definitely infrastructure :)

[Toddy]

USG and MFT stand out for phenomenal LT returns vs IFT ...USG has the comfort of low cost fund thus safer then single stock risk ...otherwise MFT beats IFT hands down on all LT time frames and both NZX stocks

A common strategy for the risk adverse on the NZX is just to hold IFT, MFT and FPH. Good solid international stocks.

Therefore comparing the returns between the stocks as competitors is not necessary.

Those risk adverse stocks as a trifecta would have made a solid return. And will continue to do so into the future.

[alokdhir]

A common strategy for the risk adverse on the NZX is just to hold IFT, MFT and FPH. Good solid international stocks.

Therefore comparing the returns between the stocks as competitors is not necessary.

Those risk adverse stocks as a trifecta would have made a solid return. And will continue to do so into the future.

Mate the discussion behind which maybe u forgot to read was Kiora asking better LT returns stocks than IFT trading on NZX ...Jaa responded with long list with MFT well ahead of IFT's 20 years return ....I just added my two cents by suggesting USG which is US Large Cap FUND ...its also doing better then IFT at present .

FYI ...Kiora has a two stock portfolio ...80% IFT and 20% FPH ....so he maybe interested in diversifying out of IFT maybe thats why he asked for better LT returns stocks then IFT ....hopefully now u know the full context of my post !!!

[huxley]

Mate the discussion behind which maybe u forgot to read was Kiora asking better LT returns stocks than IFT trading on NZX ...Jaa responded with long list with MFT well ahead of IFT's 20 years return ....I just added my two cents by suggesting USG which is US Large Cap FUND ...its also doing better then IFT at present .

FYI ...Kiora has a two stock portfolio ...80% IFT and 20% FPH ....so he maybe interested in diversifying out of IFT maybe thats why he asked for better LT returns stocks then IFT ....hopefully now u know the full context of my post !!!

I guess the question is whether this is relevant to a thread on Infratil. There’s a whole universe of low cost funds (listed and unlisted) tracking large cap US shares. If you want to talk about the merits of an investment in MFT or anything else on the NZX then there are threads available to have that discussion. It’s all good, but the discussion on here is getting off track.