DigiCo REIT (ASX:DGT), a new real estate investment trust focused on data centres, has made its debut on the ASX.
This was Australia's largest initial public offering (IPO) in six years, since Viva Energy's (ASX:VEA) 2018 listing, and the largest real-estate-related listing in over a decade. The IPO targeted $2bn in capital, but was oversubscribed, and increased to $2.746bn.
However, despite shares prices rising 2% during the first two hours of trading, DGT finished the day down 9%, closing at $4.55 (from a $5 issue price).
Backed by HMC Capital
DigiCo’s IPO marks HMC Capital’s fourth listing in five years, following previous floats of Home Consortium, HomeCo Daily Needs REIT, and HealthCo Healthcare and Wellness REIT. HMC retains an 18.2% stake in DigiCo following the listing.
HMC Capital installed former Global Switch executive director Damon Reid as head of DigiCo REIT, along with Bryan Marsh and Chris Flynn, who were brought in following HMC’s acquisition of StratCap.
Shares in HMC finished the day 7.24% lower at $11.27, but are up 85.36% year to date.
Valuation questions weigh
“There are many questions about its underlying assets, so investors that got in were mainly looking for a quick profit,” said Jun Bei Liu, portfolio manager at Tribeca Investment Partners.
Bloomberg Intelligence analysts noted that the firm’s portfolio was valued up to 70% higher than its Australian peers.
Investment research firm Morningstar valued the shares at $3.40, well below the $5 offer price, describing the offer valuation as “optimistic” given the competitive nature of the data centre industry.
Portfolio
DigiCo currently operates three data centres and aims to expand to 13 properties across Australia and North America. The IPO funds will partly be used to finalise the acquisition of Global Switch Australia, which owns two adjoining data centre sites in Sydney with a combined capacity of 20 megawatts. This is the only large-scale data centre campus in the Sydney CBD. Once the acquisition is finalised, DigiCo’s assets are projected to generate $118m in revenue and $97m in earnings before tax on an annualised basis.
The REIT's broader strategy is heavily focused on the United States, where it already has assets in Los Angeles, Kansas City, Chicago and Dallas.
HMC Capital’s Managing Director, David Di Pilla, described the US as a “huge” opportunity, citing the size of its artificial intelligence (AI) market as a major driver of growth. “There are less than 10 listed groups like this in the world, but only one that will invest right through the value chain.”
McKinsey & Co forecasts global demand for data centre infrastructure to grow at 19-22% annually from 2023 to 2030.
The sector has seen major deals this year, including Blackstone and the Canada Pension Plan Investment Board’s $24bn purchase of AirTrunk, and AustralianSuper's billion-dollar investments in the space.
