Media seems to be highlighting Morrisons $148m fee
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Media seems to be highlighting Morrisons $148m fee
I'm sure that I read somewhere that Morrisons reinvest the fee back into IFT shares.
Having taken the time to watch the entire 5h presentation on video playback a few more thoughts for those that are interested…
I’d describe the day as upbeat, bullish, confident and about as much swagger as IFT ever puts on, or at least has done historically.
In terms of new investments from a portfolio perspective, it does look like they’ll focus mainly on existing sectors / themes, or adjacent areas, rather than an imminent foray into a new territory. I’d imagine more datacentres, digital infrastructure, renewable, and radiology businesses than any leftfield move. Looks like they’ve been fishing for some time, but noted challenges that recently despite global context, private valuations hadn’t really tapered off. The infrastructure class of assets have been increasingly sought after by large fund managers and recent years had seen record deal flow. Great when they’re selling, more challenging to buy at value in the mean time. But they’re plugging away. They also had reconsidered their core, core plus and growth assets by being a little more sophisticated about how they analysed their portfolio. By way of example instead of just bucketing all of CDC into growth, they broke the business up into it’s existing build datacentre (and now categorised that as core). I’m not entirely sure about this, but it felt like they realised that they have more core assets and so this might skew them into looking for more high growth areas. I personally hope this is the case. Jason or Paul (can’t recall) did comment on why they don’t just deploy excess leverage capital into CDC / renewable in US if they’re so good. A good question to posit IMO - but risk concentration is not their focus.
They highlighted increasingly global diversification and spread of the underlying portfolio, and later HRL Morrison highlighted that their team has expanded to meet this need. They demonstrated on a slide that the high 18.5% return over 29 years put them in the top performing of their analysed infrastructure funds across available datasets (and their performance was perhaps even better in light of the length of time they’ve delivered it across). Most of the businesses that exceeded them had <10 years. The credentials were vital to their future deal flow, access to capital, access to opportunities etc.
Long road - one of the stand outs. Confident on their trajectory, capability, spent a lot of time just showing the sheer scale of the individual projects that underwrite their 1.5GW annual growth target. One of these in the future - is a 200,000 acre site that takes approx 2h to drive across. By way of example. The inflation reduction act had supercharged the business and given them more confidence, details were still emerging from how the tax incentives would work, but their IRR’s were increasing and feasibility increasing. Jason Boyes notes at the end to the investor base, go find another management team to run a US renewable business better than this team. I reckon hard pushed to find it. Deion (ex Tilt CEO) now at HRL in the mix too as Chair of Mint in AU and supporting the global play makes it a formidable line up.. The $500m plus EBITDA is definitely just on the horizon (2025/2026).
CDC, Greg Boorer remains a charismatic forthright compelling leader and entertaining presenter. He is laser focused on doubling the business within 3 years. He made one comment that in the debt financing negotiations with US banks, they simply couldn’t believe CDC’s weighted average forward sales contract tenure, and even more remarkably the length of this was growing as the business matures. I don’t think the ‘average data centre’ has this experience. Also he’s not seeing any slow down in their clients demands (unlike some consumer datacentres) It’s an exceptional business. The technology secret sauce is hard to know, Greg alludes to it, but understandably doesn’t go into technical details. With no Sandy Munroe (of tesla fame) to pull a datacentre apart and confirm it’s there, we have to take it on a bit of trust, unless of course you just let the result progression demonstrate that their clients believe in it…
Radiology businesses, more of a classic foray into a sector with good tailwinds, and an unusual dynamic with lower referrals following covid than prior to covid. Since their move into the segment, their seems to be a reasonable PE / fund activity level making buying value harder. Clearly working on teleradiology, and building out synergies and global expertise. This is probably a longer burn. If the post covid dynamics settle it’ll deliver strong gains.
Vodafone - was probably a slight upside surprise for me. Jason seemed full of swagger, not too surprising given beating his existing year forecast - but he repeatedly referred to business momentum. Said it was very hard to get in the large telco space, but also very hard to stop once you’ve got it. Vodafone was on a roll. They were selectively attacking their strategic segments and winning, seemingly pulling off the rather challenging trick of driving simplicity,achieving material cost efficiency and revenue growth. I’d say they’ll have a compelling number to contribute towards next years guidance. I remain interested in the diversification plan - a 2024 IPO seems compelling to me if the markets are supportive. What a run.
Finally, in May on year end result finalisation we’ll get their guidance for FY24. It’ll be very interesting to see given Longroad, CDC, and Vodafone and Wellington Airport all should have material increases…. If they could find a way of using that unused leverage… might be stellar. Either way it should be a solid uplift. Happy holder.