Fund Profile

Cordiant Digital Infrastructure 19 June 2024

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Cordiant Digital Infrastructure. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
CORD’s unique portfolio offers investors differentiated growth and income potential…
Overview

The management team behind Cordiant Digital Infrastructure (CORD) aim to capitalise on the growing demand for interconnected technology by buying, building, and growing a portfolio of infrastructure assets linked to the digital world. This includes towers which support TV, radio, telecoms, fibre-optic cables for internet connectivity, and data centres for storage and cloud computing support (see Portfolio).

Since the trust’s launch in 2021, the managers have acquired five companies which are owned directly or indirectly in their entirety. This allows the team, which contains a number of operational specialists, to execute a strategy of growing revenue and operating profits generated by these assets and as a result, their values. They aim to generate a total net return of 9% per annum including a moderate dividend. The portfolio is revalued twice yearly with an in-house model, which is verified by an independent accounting firm (see Performance).

The trust pays a Dividend of 4p per share. This is designed to provide investors with a cash return whilst also allowing the managers to invest in the growth of their assets. At the current share price, this dividend offers a yield of 5.5%.

The current wide Discount of the shares is contributing to the high yield. The trust initially traded at a premium before moving to a discount in mid-2022. This has since widened out significantly to its current level of 35.6%, over one standard deviation wider than the average since the trust’s inception.

The trust has strict rules on Gearing, with a maximum look-through allowance of 50% of gross assets, which includes both company and trust-level borrowings. At present, this level is below 40% of which c. 13% is at the trust level.

Kepler View

Infrastructure as an asset class has become an important portfolio diversifier in the past decade, and we believe CORD offers differentiation within the asset class due to its unique asset base and approach (see Portfolio). CORD provides ‘core plus’ infrastructure, meaning infrastructure assets that have the potential to increase their revenue generation through increasing utilisation or adding capacity. The CORD team concentrate on those sectors which form the backbone for the continued growth of connected technology in the economy. The managers’ ambitious return objective of 9% net per annum, which is to come primarily from capital growth, means the trust offers the potential of equity-like returns from an asset class which may exhibit lower operational risk than equities, supported by a trend with structural demand (see Performance). That said, the portfolio is currently relatively concentrated, which brings its own risks.

We believe the trust’s wide Discount could offer a compelling entry point at this juncture. The discount has widened out from mid-2022 onwards as interest rates rose. However, these have arguably peaked and could become a tailwind to sentiment towards the trust. We believe there is significant scope for the discount to narrow should the interest rate environment improve, and if this brings the share price back above NAV, would allow the managers to issue shares to reduce the concentration of the portfolio. The wide discount has also increased the yield available on the trust, despite its capital growth tilt (see Dividend). As such, we believe the current discount creates an income opportunity in the short term, as well as future potential for capital growth should the macro improve.

Bull

  • Asset class is well supported by structural demand for technology
  • Managed by a team of operational experts looking to generate attractive net total returns of 9% pa
  • Trust is trading at a wide discount to NAV which has increased the yield potential

Bear

  • Current portfolio profile exhibits relatively high concentration risk
  • Portfolio has elements of operational risk that may be absent from traditional infrastructure
  • Trust-level gearing needs to be repaid in 2026
Continue to Portfolio

Welcome to Kepler Trust Intelligence

Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.