IFT - Infratil

[kiora]

https://www.marketscreener.com/quote...2600/finances/

Is Spark a dividend trap?

Earnings are forecast to grow at 3.5%?
Net margin forecast to be flat?

EBITAI forecast lowered 2025,2026 ?

[kiora]

X roads & troubled? No
Dynamic? yes

When IFT have been growing organically for 30 years.They do their research,they take out long term contracts,they use the margin between long term contracts and funding to increase the returns for shareholders
( including Sovereign Wealth Funds)

Hmm doubt that its troubled water myself.Infratil Investor Presentation.pdf

[kiora]

Is Spark & CDC data centers competing against each other?
I somehow doubt it

[Snoopy]

https://www.marketscreener.com/quote...2600/finances/

Is Spark a dividend trap?

Earnings are forecast to grow at 3.5%?
Net margin forecast to be flat?

EBITAI forecast lowered 2025,2026 ?

Answer transferred to the SPK thread
https://www.sharetrader.co.nz/showth...=1#post1058907

SNOOPY

[Snoopy]

Is Spark & CDC data centers competing against each other?
I somehow doubt it

CDC have most of their datacentre investments in Australia, which are off the radar for Spark. But in Auckland CDC and Spark are looking like they are building very similar capacity data centre portfolios. Why wouldn't CDC and Spark be touting for the same customers in Auckland?

SNOOPY

[kiora]

CDC have most of their datacentre investments in Australia, which are off the radar for Spark. But in Auckland CDC and Spark are looking like they are building very similar capacity data centre portfolios. Why wouldn't CDC and Spark be touting for the same customers in Auckland?

SNOOPY

See attachment on #3702 for the opportunities

Spark is capital restricted.
Infratil has /will have $1.8b new capital to deploy over their portfolio

[Snoopy]

See attachment on #3702 for the opportunities

Spark is capital restricted.
Infratil has /will have $1.8b new capital to deploy over their portfolio

While it is obvious that Infratil has a lot more capital available to splash on new projects than Spark, I push back against your claim that Spark is 'capital restricted'. From the Spark May 2024 profit downgrade:

"There is no change to FY24 capital expenditure and dividend guidance."

That doesn't sound like a company that is 'capital restricted' to me. And if Spark were really capital restricted, why have they spent so much on share buybacks during the year?

SNOOPY

[maclir]

Good to see more grid-scale battery investment, this from Contact https://www.nzx.com/announcements/433677

[mike2020]

What happens when all the new shares hit the market? Theres currently around a dollar instant profit to be made, does anyone think there will be a sell down soon after? Personally I am surprised at the premium on market available right now.

[Snoopy]

We know that Infratil own a 48.24% stake of CDC. But this time, rather than create possible extra confusion by trying to adjust for the Infratil share all the way through (looking back over my previous 5 attempts I even managed to confuse myself, although I believe these errors are now corrected) I will use the raw CDC numbers and make any Infratil ownership share adjustments right at the end.

I have been criticised for not taking into account 'capitalisation of interest' in my net profit calculation. If interest is capitalised, it no longer becomes an expense. So this means the profit figures are higher than the numbers I have been touting. For those doubters out there I have decided to make the adjustment. So how do I make this change?


Interest Calculation

Starting from the Infratil capital raising presentation:
https://infratil.com/news/infratil-a...-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 '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 completed 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 3% (a pure guess on my part). That means the annual interest charge for CDC would be: 0.03 x $A4,251.1m = $127.5m. 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 $127.5m = $25.7m. So $25.7m 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. AR2024 p80, that is showing that the carrying value of CDC on the Infratil books at the start of the financial year was $1,403.4m. That means we can estimate our annual CDC depreciation charge as 1/40 th of this number. $1.403.4m/40 = $35.1m. But the equivalent depreciation figure for the whole CDC company is: $35.1m/0.4823=$72.8m






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

According to 'forest' who attended the presentation CDC presently earn 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' is $175m NPAT).

This means 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 - $127.5m - $72.8m ) = $49.5m, of which the IFT share is 0.4824 x $49.5m = $23.9m

For capitalisation of interest allowed, I get:
'Operational NPAT' = 0.7 ( $271m - ($127.5m - $25.7m) - $72.8m ) = $67.5m, of which the IFT share is 0.4824 x $67.5m = $32.6m


I am 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 $32.6m profit into a (0.4824x$201.9m=)$97.4m profit (the NPAT declared in AR2024 p80).

(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