Cordiant Digital Infrastructure Ltd (LSE:CORD) has been upgraded to a 'buy' at Jefferies, which sees syndication of its stakes in CRA and Emitel as having clear benefits in terms of portfolio diversification and current values.
“Optically cheap valuation multiples, coupled with a heavy 46% share price discount to NAV, also provide investors with an attractive margin of safety, and so we upgrade,” says the US bank.
Cordiant recently completed the acquisition of Speed Fibre Group (SFG) for an equity consideration of €97.2 million, since when it also announced the acquisition of Norkring België - an owner of communication and broadcast towers in Belgium - for an EV of €5.25 million.
“While CORD could make further acquisitions, depending on their size and structure, the next step may be to instead syndicate stakes in existing portfolio companies, specifically CRA and Emitel," according to Jefferies.
“This would help reduce the heavy concentration on these names given they represent 41% and 45% of the current portfolio respectively by valuation.“
Both are also exclusively focused on Eastern Europe, so utilising the cash raised to reduce this exposure would remove of the main investor impediments to owning the shares, adds Jefferies.
CORD would also become eligible for LSE premium listing, allowing it to move from its current Specialist Fund Segment (SFS) listing and gain index inclusion.
Finally, third-party stake acquisitions would independently validate the carrying valuations.
Jefferies also suggests CORD has been dragged down by listed digital in infrastructure peer Digital 9, but adds their positions are very different.
“CORD has a material liquidity position both at the fund and portfolio-company level, has predominately cash generative assets, and dividend cover of 1.5 times when including maintenance capex.”