HMC Capital's DigiCo Infrastructure REIT edges down after IPO
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The news: Shares in DigiCo Infrastructure REIT edged down on the ASX, after HMC Capital's new real estate investment trust marked the sharemarket's biggest float since Viva Energy in 2018.
The numbers: DigiCo shares were down 0.2% to $4.99 by 1:50pm AEDT, having opened at $5 per share. HMC shares were down 3.3% to $11.75.
The context: Prior to the IPO, Morningstar analyst Lochlan Halloway noted that "where DigiCo closes on its first day is anyone's guess" but that it may find support on the basis that "data centres are a hot theme, the deal is oversubscribed, and there has been a dearth of new opportunities for investors this year".
However, Halloway believes DigiCo's shares are overvalued, with Morningstar's fair value estimate set at $3.40 per share.
Investment manager HMC Capital announced the listing after a series of data centre acquisitions this year, but Halloway warned that DigiCo may see increased competition longer term.
What they said: "While rapid near-term demand growth can drive strong returns, in the long term, we think the barriers to adding new data centre supply are relatively low," said Halloway.
"We think industry returns will trend toward the cost of capital and do not see an economic moat in any of the traditional moat sources for data centres, such as network effects, switching costs, or scale-based cost advantages," he said.
The source: Morningstar research
