IFT - Infratil

[mike2020]

Some very odd observations about ift being in data centres - referring to the growth in demand for their use as a bubble and insinuating MCO are naive and Kiwi focussed. What a load of ill judged tripe! MCO are global, have sector experience and have some of the best corporate minds globally. Idiotic to think they’ve stumbled into some good investments. They’ve manoeuvred their way into fast growing assets through thoughtful future focussed insight. No lottery ticket luck here.s just plain hard graft and patient investment.
The data centres have an average forward contract tenure in multiple decades, and cdc’s growth is not contracted until they’re mostly forward sold. The debt providers that analyse a lot of data centre businesses describe CDC as a unique data centre asset (the best in the world form a credit perspective) given longevity of forward contracts and the high quality of their clients. So pray… explain the risk?
As to the big boys swamping them… ignores CDC’s competitive advantage of being co-owned by AU super and ift (asx/nzx listed entity as helping Govt, and large AU corporations get around cloud based data sovereignty issues. It ignores the quality execution by CDC management to date.
Finally to think AI is some buzz word blip and it’s a passing phase before the bubble bursts demonstrates a remarkably myopic view of technology that I think beggers belief.
Needless to say happy holder and once again we’ll see how it plays out for CDC over the coming years. I suspect I know. Applied for $150k. Bring it on. Ift lining up $2bn plus in capacity growth for CDC. It should be lauded that a NZ originated story is at the epicentre of growth and change. May all NZ KiwiSaver funds benefit.
Let’s back it.

Well said, and they get into this position by having an eye for the future and even now are looking for what will come next.

[winner69]

Snoopy’s hard work been listened to …CDC valuation gone up heaps

http://nzx-prod-s7fsd7f98s.s3-websit...951/422095.pdf

[LaserEyeKiwi]

The goose keeps laying golden eggs:

https://www.nzx.com/announcements/433951

CDC Independent Valuation - 30 June 2024

4/07/2024, 08:37 NZST, MKTUPDTE


The 30 June 2024 independent valuation of Infratil’s investment in CDC shows an increase of A$466 million over the three months since the 31 March 2024 valuation. 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. The increase in valuation reflects the updated CDC pipeline disclosed at the announcement of Infratil’s June 2024 equity raising. 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. As a result, CDC is developing a new Sydney data centre campus at Marsden Park, contributing to an increase in CDC’s future build capacity by 661MW to 1,197MW and total planned capacity of 1,887MW (up from 1,220MW in March 2024). This expanded pipeline demonstrates the favourable market tailwinds for data centres and the strong progress in CDC’s customer discussions. Total operating capacity has increased by 34MW since 31 March 2024, reflecting CDC’s first data centre development in Melbourne (Brooklyn 1) commencing operations.

Region Status Build Capacity (MW), as at 31 March 2024 Build Capacity (MW), as at 30 June 2024
Canberra Operating 117 117
Sydney Operating 123 123
Melbourne Operating - 34
Auckland Operating 28 28
Total Operating Capacity 268 302
Canberra Under Construction 39 39
Sydney Under Construction 158 158
Melbourne Under Construction 151 121
Auckland Under Construction 68 70
Total Under Construction Capacity 416 388
Canberra Future Build 91 90
Sydney Future Build 269 872
Melbourne Future Build 98 157
Australian Expansion Future Build 36 36
Auckland Future Build 42 42
Total Future Build Capacity 536 1,197
Total Capacity 1,220 1,887

The blended cost of equity used in the valuation has increased from 11.25% to 11.50% between March and June 2024. This primarily reflects an increase in gearing as a result of higher forecast debt levels as CDC continues investment in its expanded development pipeline. 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. The risk-free rate has remained constant at 3.90%. From a funding perspective, this valuation reflects the guidance provided as part of Infratil’s June 2024 equity raising, with Infratil’s pro-rata share of equity contributions to CDC at approximately A$600 million over the next two years. This represents an increase of ~A$150 million (on the same pro-rata basis) relative to what was assumed in the March 2024 valuation. CDC intends to continue accessing a range of debt markets to provide further funding for its expanded development pipeline. Net debt as at 30 June 2024 was A$3,262 million. CDC’s FY2025 full-year EBITDAF guidance of A$320 million to A$330 million remains unchanged.

Enquiries should be directed to: Mark Flesher Investor Relations mark.flesher@infratil.com  

Appendix 1 – Independent Valuation Summary 30 June 2024 Valuation Methodology 31 March 2024 30 June 2024 Primary valuation methodology DCF using FCFE (with a cross check to comparable companies and precedent transactions), surplus and underutilised land at cost Forecast period 15 years (2039) 15 years (2039) Enterprise value A$11,118m A$12,723m Equity value A$8,412m (IFT share A$4,058m) A$9,376m (IFT share A$4,524m) Key Valuation Assumptions Risk free rate 3.90% 3.90% Asset beta 0.55 0.55 Cost of equity (blended rate) reflecting the assessed risk of the spectrum of CDC’s activity, from operating data centres with contracted revenues through to developing projects without contracted revenues. 11.25% 11.50% Terminal growth rate 2.5% 2.5% Long term EBITDA margin 85% 85% Capex Future capex reflects CDC’s published development pipeline Valuation assumes no development beyond 2031 Valuation assumes no development beyond 2033

[Snoopy]

The goose keeps laying golden eggs:

I would summarize the announcement differently. Plans have been laid out for the new hen houses until 2033, into which the 'golden geese' will be housed. Nine years worth of golden eggs have already been booked as 'profit today', even though more than half the hen houses do not yet exist and most of the golden geese producing those eggs are yet to be born. The announcement today is an egregious exercise in 'future eating' which may or may not come to pass as laid out. Beware the potential of 'bird flu'.

SNOOPY

[kiora]

I would summarize the announcement differently. Plans have been laid out for the new hen houses until 2033, into which the 'golden geese' will be housed. Nine years worth of golden eggs have already been booked as 'profit today', even though more than half the hen houses do not yet exist and most of the golden geese producing those eggs are yet to be born. The announcement today is an egregious exercise in 'future eating' which may or may not come to pass as laid out. Beware the potential of 'bird flu'.

SNOOPY

You'll be loading up on Spark now then Snoopy while preparing for bird flu?

[Ggcc]

I would summarize the announcement differently. Plans have been laid out for the new hen houses until 2033, into which the 'golden geese' will be housed. Nine years worth of golden eggs have already been booked as 'profit today', even though more than half the hen houses do not yet exist and most of the golden geese producing those eggs are yet to be born. The announcement today is an egregious exercise in 'future eating' which may or may not come to pass as laid out. Beware the potential of 'bird flu'.

SNOOPY

I agree that we might be looking through rose tinted glasses, but would you agree that yours might be Jaded. I feel that these Morrison and Co guys are super smart individuals and talk to like minded people. They see the trends and swim with them and if they see no further growth potential, they will sell it. I have had this debate with Blackpeter for over the last few years and to this day he has called it wrong and missed out on so many gains and dividends.

Not saying it can't drop, but I see no need to reduce yet and have made thousands since 2014. This by far has been my best longterm hold. I could have made more with FPH, but I was wrong and called that wrong for years.

[Ferg]

I guess where Snoopy is heading (correct me if I am wrong) is he is trying to assess the profitability of CDC, in particular from a viewpoint of investors and the return on investment for data centres. And how that may or may not apply to Spark. Fair enough for having a go and I agree the current financials for CDC do not look appealing. It is hard to see how the valuation is justified when looking at just the current financial results.

However IFT and/or CDC would have engaged some suitably qualified & very smart cookies to assist with the valuation. The over-arching issue for investors is we are not in possession of the same amount of information about CDC than those making the valuation and investment decisions.

Whilst I am happy to dig around and figure out some numbers, I do so without judgement given IMO it is too early to make any meaningful calls.

In particular, if we try to assess profitability while CDC is still growing, then we are assessing something that is not only half built but the part that has been built is half sold. {I find the current sale metrics a little confusing in that I am not 100% sure what is meant by "white space" and why this is included the sold %.....but I digress.} The point being that any return on assets or equity will be meaningless at the moment, until we can get a measure on the value of completed developments versus those that are still a work in progress. Some assets may be bare land, whilst others might be almost completed - none of which are currently making a positive contribution to current EBITDAF.

I note that the valuation methodology says "surplus and underutilised land at cost" which could be conservative. But to try and figure out this component will be an exercise in futility.

At the risk of stating the obvious, the biggest questions for me are whether 85% EBITDAF and if projected sales can be achieved. In a fast growing market with such a high EBITDAF, I would expect to see more competitors entering the market which could impact pricing but that could be a while away. This graph and explanation are still applicable:
https://textbook.stpauls.br/Business...t/page_115.htm

KPIs for investors to watch......CDC $ sales growth, facility sold %, EBITDAF % and return on equity (once development slows). IMO everything else is noise. But we should be careful of trying to make assessments now based on something that is incomplete.

[Jaa]

CDC certainly has an advantage in its traditional market of government linked customers in Canberra. This is not where they are expanding however as the under construction and future development data above shows. Most of the new capacity is in Sydney and Melbourne, both much more competitive markets. Their biggest future customers, big tech drives a hard bargain and will drive margins down or just build their own data centres in competition. So CDC's average operating metrics will decline over time leading to a lower valuation multiple. Deworsefication.

As to whether there is a data centre boom on at the moment, come on, have a look around the world, Malaysia is planning 5GW of capacity. The question is whether demand will continue at the same pace. I gave me thoughts on why I wouldn't bet on it in a prior post.

If the investment was just in CDC I would be inclined to back them as one poster suggested. Unfortunately there are significant fees layered on top that make the investment riskier and less rewarding than it needs to be. We are talking about $230-280m a year or around 3-4% of market cap yearly payable to a very small team. This is partly why IFT is constantly raising capital, something I have learned to distrust in listed companies. A much larger IFT benefits Morrison & Co much more than ordinary shareholders.