Cordiant Digital Infrastructure Ltd (LSE:CORD) offers a compelling opportunity for investors seeking exposure to the evolving digital infrastructure sector.
Despite recovering from its October 2023 share price lows, the stock still trades at a 28% discount to its net asset value (NAV), highlighting what Peel Hunt describes as "potentially material upside".
Cordiant's portfolio, centred on Central European broadcast businesses Emitel and CRA, has diversified significantly into data centres and other digital infrastructure segments.
CRA, for instance, reported that broadcast revenues fell below half of its total revenue for the first time in 2024, driven by rapid growth in its data centre and cloud operations.
Growth opportunities
Emitel and CRA have also benefitted from both organic growth, such as new contracts, and inorganic opportunities, including bolt-on acquisitions.
These strategic moves have enhanced portfolio valuation and revenue diversification, according to Peel Hunt, which rates the stock 'outperform'.
The investment company is also positioned to capitalise on further growth. CRA’s data centre project in Zbraslav, capable of delivering up to 26MW of capacity, is set to become the largest in the Czech Republic and a key asset in Central and Eastern Europe.
With zoning approvals secured in December, this milestone removes a significant planning hurdle.
Cordiant’s portfolio is underpinned by cash-generative assets with long-term contractual revenues, many of which include inflation-linked adjustments.
Financial stability
This financial stability has enabled the trust to raise its dividend guidance for the year ended March 2024 by 5% to 4.2p per share.
Peel Hunt expects this to rise further in 2025 and beyond, projecting a dividend yield of approximately 4.5% alongside a robust estimated internal rate of return (IRR) of 14.2%.
Leverage remains manageable, with gross debt of £653 million, representing 38% of gross asset value (GAV), and total liquidity of £244 million.
These financial resources provide Cordiant with the flexibility to pursue additional growth opportunities, particularly in data centres, a subsector poised for continued expansion.
Peel Hunt also highlights Cordiant’s valuation as attractive, noting the undemanding multiples of its portfolio companies.
The market’s scepticism appears misplaced, as Cordiant’s management and the leadership of its portfolio businesses are delivering on growth plans, further enhancing the trust’s investment appeal, the broker adds.
Diversified
With its diversified strategy, strong cash generation, and scope for both income and capital appreciation, Cordiant Digital Infrastructure represents an overlooked opportunity in the digital infrastructure space, Peel's research concludes.
Investors stand to benefit from its focus on high-growth assets while enjoying the stability of inflation-linked revenues in a rapidly evolving market.
In afternoon trading, the stock was flat at 89.52p.