Cordiant Digital Infrastructure Ltd (LSE:CORD) saw a strong recovery in 2024, with its share price rising nearly 20% but analysts at Kepler highlighted to investors that the trust’s discount to the net asset value of its portfolio remains wider than its historical average.
The company follows a "Buy, Build & Grow" strategy, focusing on infrastructure assets that support the digital economy.
Its two largest holdings, Emitel and CRA, have expanded their network infrastructure in Poland and the Czech Republic, signing new contracts that have driven revenue growth.
The company has also invested in data centres to capture demand from AI-related services, including the acquisition of a new sixth company, Datacenter United (DCU), a Belgian data centre business, wth full regulatory approval due in the first quarter of 2025.
A key development has been the agreement of a €200 million borrowing facility, which has mitigated refinancing risks, leaving no debt maturing until mid-2029.
Kepler's analysts believe this has helped stabilize the company’s gearing position.
The narrowing of CORD’s discount has significantly contributed to shareholder returns, with the discount closing from a nadir of circa 48% in April 2024 to around 26% at year-end, showing a narrowing of 21 percentage points and resulting in a share price return of circa 43% and "a prime demonstration of what impact a narrowing discount can have on shareholder returns"
Despite this rally, they believe the current discount could still provide upside.
The company’s NAV performance exceeded its 9% annualized target in the first half of 2024. The dividend has been raised twice since inception and remains well supported by revenue growth.
Analysts highlighted that while CORD’s portfolio remains highly concentrated in two key holdings, refinancing risks have been addressed. The trust’s strategy, combined with continued portfolio development, could support further gains.
"CORD’s impressive share price performance could lead investors to believe the digital nomenclature relates to the US mega-cap names, such have been returns in 2024.
"In truth, we believe this reflects the resilience of the underlying asset class as a key piece of infrastructure in the increasingly interconnected world as well as improved investor confidence in the ability of the management team to capitalise on this."
Even after last year's rally, the analysts believe the current discount "could still provide upside from here, as it remains wider than the average level since inception and as portfolio development continues apace" and the gearing position has been largely stabilised by the borrowing facility, with no refinancing required until 2029.
"In our view, this has removed one of CORD’s main near-term risks and provided management breathing room to continue to develop the portfolio."
The NAV performance being ahead of the annualised 9% target in the first half of the 2024 "is a good demonstration of the management team’s expertise, which has not only increased valuations of their holding, but also supports the dividend".