E&P Capital opens DigiCo REIT coverage with 'positive' rating
Make us a preferred source
Make us a preferred source on Google
The news: E&P Capital has initiated coverage on ASX newcomer DigiCo Infrastructure REIT with a 'positive' recommendation and price target of $5.13.
The numbers: E&P's price target is nearly 20% higher than DigiCo's last closing price of $4.32. The data centre owner and developer first floated at $5 in December.
The context: E&P Capital analyst Paul Mason said that DigiCo "represents one of few data centre exposures on the ASX, an asset class currently generally benefiting from growth in cloud computing and AI, and therefore with underlying attractive fundamentals".
Mason noted that DigiCo's planned expansion of its flagship Switch Sydney site — increasing its capacity from 42 megawatts to 88 megawatts — will make the data centre "very valuable".
What they said: "We believe that DigiCo can provide upside to shareholders overall, however [...] the elements that have meant we are more constrained in our view than other ASX-listed data centre exposures are: starting point with relatively higher gearing, an external management structure, and more complex or more speculative growth options and plans," Mason said.
"With that said, we also believe that the world at large is generally short on good data centre supply and that the right developments will get rewarded."
The source: E&P Capital research
