New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Infratil<br>Data Centre Growth Ramp</h2>
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<p><strong>NEUTRAL</strong></p>
<p>Infratil's (IFT) mini investor day reiterated recent themes; CDC Data Centres (CDC) is IFT's growth engine and Vodafone has plenty of opportunity in front of it. CDC has been IFT's stand-out investment for the past three years and that has not changed, with growth expectations continuing to accelerate. A significant lift in our CDC valuation (up +NZ$1.54 to NZ$3.50) has been the key driver of the +NZ$1.33 increase in our target price to NZ$5.95. However, we retain our NEUTRAL rating as we have some concerns over how far data centre valuations have run.</p>
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<h3>What's changed?&nbsp;</h3>
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<li><strong>Net asset value</strong>:&nbsp;Increased +NZ$1.33&nbsp;to NZ$7.08</li>
<li><strong>Target price</strong>:&nbsp;Increased +NZ$1.25&nbsp;to NZ$5.95</li>
<li><strong>Rating</strong>:&nbsp;NEUTRAL rating retained</li>
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<h3>CDC growth trajectory&nbsp;steepens,&nbsp;Vodafone&nbsp;still has the opportunity in front of it</h3>
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<p>Our key&nbsp;take-out from the CDC presentation is that the growth opportunity has increased. Compared to the last update at the FY20 result in May 2020, installed MW capacity at 31 March 2022 is expected to be 220MW. This is&nbsp;an increase of +57MW, and the visible potential has increased from 278MW to 430MW. COVID-19 was beneficial for CDC (and data centres generally) as it increased the use of digital services.</p>
<p>In contrast, COVID-19 has provided&nbsp;Vodafone&nbsp;with more near-term challenges,&nbsp;with FY21 EBITDAF likely to be -NZ$60m to -NZ$75m lower than it otherwise would have been. The key take-out from the&nbsp;Vodafone&nbsp;presentation is that the opportunity still lies in front it.</p>
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<h3>CDC value surge lifts IFT target price, and portfolio incentive fee estimate</h3>
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<p>The +NZ$1.33 increase in our net asset value to NZ$7.08 has been driven by an +NZ$1.55 increase in our CDC valuation. Several factors are behind the CDC valuation increase including a lift in the growth trajectory, a reduction in our cost of capital estimate and a +55% increase in nearest comparator&nbsp;NextDC's&nbsp;share price since the end of March 2020. CDC is the most valuable business in&nbsp;IFT's&nbsp;portfolio at ~35% of total assets.</p>
<p>We have also lifted our valuations of&nbsp;Trustpower&nbsp;(TPW) and Tilt&nbsp;Renewables&nbsp;(TLT) following recent reports on those companies. Offsetting the valuation increases is an estimate of the International Portfolio Incentive Fee, which based on NXT metrics could be in the order of NZ$225m in FY21. We have not changed our Wellington Airport or&nbsp;Vodafone&nbsp;valuations at this point, pending more information that we expect will be released at&nbsp;IFT's&nbsp;1H21 result on Thursday, 12 November.</p>
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<div><strong>Andrew Harvey-Green</strong></div>
<div><a href="mailto:andrew.harvey-green@forsythbarr.co.nz" target="_blank" rel="noopener">andrew.harvey-green@<wbr>forsythbarr.co.nz</a></div>
<div>+64 4 495 8185</div>
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<div><strong>Scott Anderson</strong></div>
<div><a href="mailto:scott.anderson@forsythbarr.co.nz" target="_blank" rel="noopener">scott.anderson@forsythbarr.co.<wbr>nz</a></div>
<div>+64 4 914 2219</div>
</div>
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Infratil Data Centre Growth Ramp

NEUTRAL
Infratil's (IFT) mini investor day reiterated recent themes; CDC Data Centres (CDC) is IFT's growth engine and Vodafone has plenty of opportunity in front of it. CDC has been IFT's stand-out investment for the past three years and that has not changed, with growth expectations continuing to accelerate. A significant lift in our CDC valuation (up +NZ$1.54 to NZ$3.50) has been the key driver of the +NZ$1.33 increase in our target price to NZ$5.95. However, we retain our NEUTRAL rating as we have some concerns over how far data centre valuations have run.


What's changed?&nbsp;



Net asset value:&nbsp;Increased +NZ$1.33&nbsp;to NZ$7.08
Target price:&nbsp;Increased +NZ$1.25&nbsp;to NZ$5.95
Rating:&nbsp;NEUTRAL rating retained



CDC growth trajectory&nbsp;steepens,&nbsp;Vodafone&nbsp;still has the opportunity in front of it


Our key&nbsp;take-out from the CDC presentation is that the growth opportunity has increased. Compared to the last update at the FY20 result in May 2020, installed MW capacity at 31 March 2022 is expected to be 220MW. This is&nbsp;an increase of +57MW, and the visible potential has increased from 278MW to 430MW. COVID-19 was beneficial for CDC (and data centres generally) as it increased the use of digital services.
In contrast, COVID-19 has provided&nbsp;Vodafone&nbsp;with more near-term challenges,&nbsp;with FY21 EBITDAF likely to be -NZ$60m to -NZ$75m lower than it otherwise would have been. The key take-out from the&nbsp;Vodafone&nbsp;presentation is that the opportunity still lies in front it.


CDC value surge lifts IFT target price, and portfolio incentive fee estimate


The +NZ$1.33 increase in our net asset value to NZ$7.08 has been driven by an +NZ$1.55 increase in our CDC valuation. Several factors are behind the CDC valuation increase including a lift in the growth trajectory, a reduction in our cost of capital estimate and a +55% increase in nearest comparator&nbsp;NextDC's&nbsp;share price since the end of March 2020. CDC is the most valuable business in&nbsp;IFT's&nbsp;portfolio at ~35% of total assets.
We have also lifted our valuations of&nbsp;Trustpower&nbsp;(TPW) and Tilt&nbsp;Renewables&nbsp;(TLT) following recent reports on those companies. Offsetting the valuation increases is an estimate of the International Portfolio Incentive Fee, which based on NXT metrics could be in the order of NZ$225m in FY21. We have not changed our Wellington Airport or&nbsp;Vodafone&nbsp;valuations at this point, pending more information that we expect will be released at&nbsp;IFT's&nbsp;1H21 result on Thursday, 12 November.



Andrew Harvey-Green
andrew.harvey-green@forsythbarr.co.nz
+64 4 495 8185





Scott Anderson
scott.anderson@forsythbarr.co.nz
+64 4 914 2219



Infratil Ltd

Infratil: Data Centre Growth Ramp