Cordiant Digital Infrastructure, a London-listed fund now valued at £950million, has grown from a small-cap stock into a FTSE 250 constituent by buying and expanding digital infrastructure across central Europe.
The company owns mobile masts, fibre-optic cables, television and radio transmitters, and data centres, the physical assets that underpin streaming, browsing and downloading. Cordiant floated in 2021 and moved into the FTSE 250 in June, and it remains the only London-listed fund offering direct exposure to this type of infrastructure.
Buy, build and grow
Cordiant describes its strategy in three words: buy, build and grow. The fund seeks out established, cash-generative infrastructure companies in smaller European markets, buys them outright at what it considers sensible prices, then invests to expand them.
The fund has assembled six businesses across Poland, the Czech Republic, Ireland, Belgium and, further afield, New York. Together they operate 1,440 communications towers, more than 14,000km of fibre and 24 data centres.
Two of its holdings, Emitel in Poland and CRA in the Czech Republic, are effectively national champions in broadcasting and mobile masts. Broadcasting generates the largest share of revenue, followed by fibre, with towers and data centres making up the remainder.
Cordiant bought the businesses at an average of around ten times cash profits, which it regards as a modest price for assets of this quality. Gains since launch have come mainly from the companies growing rather than from Cordiant marking up their value.
Long contracts, a covered dividend
The appeal of digital infrastructure lies in its predictability. Customers sign long-term deals, and Cordiant has roughly £952million of contracted revenue stretching out to 2044, much of it linked to inflation.
That steady cash flow funds a dividend yielding about 3.5 per cent, which the company says is comfortably covered, while still leaving money for reinvestment.
The fund has delivered an annual return on net assets of 11.3 per cent since 2021, ahead of its own 9 per cent minimum target. Its move to the main market and into the FTSE 250 has also widened the pool of investors able to buy shares.
Executive chairman Steven Marshall previously ran the United States operations of American Tower, one of the world's largest mast owners.
What the broker sees
Cordiant's net asset value is put at 146p a share, yet the stock trades at 124p, a discount of around 15 per cent.
Panmure Liberum thinks that gap is far too wide. The broker has lifted its price target to 171p, from 120p, and rates the shares a buy.
Panmure argues that accountants value Cordiant cautiously, using conservative cash-flow models that ignore what the physical assets would actually fetch if sold. Adding up the towers, fibre and data centres at prices similar buyers have paid elsewhere, the broker says the business is worth nearer 179p a share, which would be 44 per cent above the current price.
Two growth projects, a large data centre near Prague and a tower-building programme in Poland, are barely reflected in the current valuation. Combining the potential re-rating with the dividend, Panmure sees a total return of about 42 per cent over the coming year.
The risks
None of this is guaranteed. The discount has proved stubborn and could persist if buyers remain unconvinced.
That creates a practical problem: Cordiant cannot easily raise fresh money by issuing shares below their asset value, which limits how quickly it can fund its growth plans. Building data centres and filling them with tenants also carries execution risk, since returns depend on that space being let.
Because the assets sit in Poland, the Czech Republic and Belgium, earnings arrive in zloty, koruna and euros, so a stronger pound would reduce their value in sterling. Higher energy prices could also squeeze margins if cheap power deals expire, and investors have learned to treat headline asset valuations across the fund sector with caution.
Still, for those who believe demand for data will keep rising, Cordiant offers a direct way to own the infrastructure that carries it, at a price its broker argues is too low.
