Regular readers will know I am very bullish about digital infrastructure as a specialist sub asset class. I have personally invested in both the UK listed entities, Cordiant and D9 – though I put more money into D9.
Yesterday brought some positive news from Cordiant. My slight worry with Cordiant was how quickly they’d deploy their capital, but it sounds like they’ve been fairly active behind the scenes. Here is the Numis note on the two acquisitions announced yesterday:
“CRA: CRA is digital infrastructure platform with contracted, long term, growing revenues in the Czech Republic. The assets include a portfolio of digital broadcast towers that would be challenging to replace or replicate, a nationwide network of mobile towers, an optical backbone network, and a portfolio of strategically located data centres. The Czech Republic has a number of unique attributes, including historically robust demand for broadcast entertainment to a population distributed in a manner well-suited to CRA’s network. In addition, it is demonstrating rapid convergence with the economies of the European Union’s historic core. Growth opportunities exist in supporting the mobile operators with infrastructure as well as in expanding the size and reach of the data centre platforms. Management believes there is significant potential to expand CRA’s network offerings in the “Internet of Things”. The network already offers smart metering for water, electricity and gas for companies including E.ON and RWE.
“Fibre Optic Network Acquisition – Norway: CORD has entered into a binding letter of intent to acquire an extensive fibre-optic network linking regions of Norway to Scandinavia and the population densities of the core of Europe. Customers include telecommunications operators, industrial concerns and utilities who have signed long-term contracts and for whom the fibre connectivity is of critical importance. Approximately half of the network’s fibres have currently been leased, offering significant potential to increase revenues with existing and new customers (such as data centre operators). Management believes that the region offers the least expensive, most environmentally friendly and abundant electrical power in Europe with attractive low operating costs for data centre operators. As such, Scandinavia is expected to attract increasing investment in data centres and require augmented fibre optic capacity. In addition, the Company has signed an agreement to invest in strategically-located Norwegian land parcels with substantial power availability. These offer development potential for data centre operators, thereby providing a potential base on which to grow a Nordic data platform.”
Both deals look like they’ll be kicking a fair chunk of money into the fund as Cordiant also announced that is now looking to pay a “dividend of 3p in respect of its first financial year ending 31 March 2022”, well ahead of its target.
At one point, Cordiant was trading below par – which I thought was a bit cheap – but now the shares are at around 103.5p. Given that there is a lump of subscription shares kicking around, and there’s also the distinct possibility of more placings, I don’t see the share price moving much above the 105 to 110p range. But I would note that D9, my slightly preferred play, is already 110p, with a near term dividend yield of around 5.4%.
Turning to the crypto end of the digital spectrum I found myself buying some shares (a very small speculative amount) in a new Aquis crypto stock called Dispersion Holdings. This is focused on decentralised finance or DeFi and is a compliment to KR2 and NFT Investments, both of which I also own, and both of which are on Aquis as well.
The company was established by Mike Edwards who is the co-founder of the LSE listed cryptominer Argo Blockchain, one of the highest risers in the history of the main market.
The company began trading at 3p per share and the last time I looked on the screens it was around 4p. According to a press release for the vehicle: “This month the DeFi ecosystem breached $100 billion in total value, Swiss banks are now scrambling to have their clients exposed to the sector and some of the biggest funds in the US are also piling in. Mike Edwards believes London now has a golden opportunity to become a global centre for this rapidly evolving sector….The flotation will enable Dispersion Holdings to raise the public profile of DeFi and provide new funds for the Company to execute its portfolio driven investment strategy and realise long-term value creation. The global DeFi market is seeing strong growth and by August 2020, it was estimated that $7 billion was held in various DeFi platforms (source: medium.com)…..The Company has already made initial investments in NFT Investments plc and ePIC Blockchain Technologies, Inc..”
Look, we all know there is something slightly crazy about the crypto space but it just won’t die. There is real interest out there and whatever the cynics – like me – say, it is evolving fast and is capable of producing some very bizarre valuations. I think DeFi – also the focus of KR1 and its rocketing share price – is probably the most interesting bit of the spectrum and so this could be a speculative play on the space. That said I note that NFT Investments has been trading BELOW its issue price, which tends to suggest to me it might have been a bit over hyped before launch. Dispersion has debuted with a solid gain.