Australia | 1:26 PM
Exciting growth opportunities abound for New-Zealand based infrastructure play Infratil. Management has consistently generated value for shareholders over time.
-Infratil’s FY25 earnings beat management’s guidance
-Exposure to high-growth digital infrastructure
-CDC Data Centres appears undervalued
-Renewables exposure weighted heavily to solar and battery projects
By Mark Woodruff
Shares in externally managed infrastructure holding company, New Zealand-based Infratil ((IFT)), have displayed consistent performance over time. The company’s primary share listing is on the New Zealand Exchange and shares are also listed on the ASX.
In the first half of FY25 alone (March year-end), shares delivered a 14.5% total shareholder return (TSR), including dividends, far outpacing the NZX50 Index’s circa 2.7% return in that period.
In recent years, Infratil (market capitalisation around $11bn) has averaged a greater than 20% annual total return (management targets post-tax, post-fee returns of 11–15% per year), underscoring an ability to generate value through active portfolio management.
Infratil’s external manager, Morrison & Co, continues to oversee day-to-day management of a portfolio spanning four core infrastructure sectors: digital (66% of assets as of March 2025) is the largest, while renewable energy, healthcare, and airports accounted for 21%, 8%, and 5%, respectively.
Morgan Stanley expects digital infrastructure to continue increasing its share of Infratil’s portfolio, which, if realised, could act as a catalyst for a share price re-rating.
The broker points to the current "surge" in AI capex being underpinned by the four hyperscalers, which is expected to underwrite growth in global data centre capacity by 23% on a compound average rate to 2030.
The overall portfolio exceeds NZ$18bn in value, concentrated in high-growth infrastructure sectors. Data centres and renewables make up more than 80% of assets, with additional stable cash flow derived from airports, telecommunications, and healthcare.
Over the past 18 months, management has actively reshaped the portfolio through strategic acquisitions and divestments, while investing in growth platforms aligned with long-term trends such as renewable power and data demand.
Infratil's FY25 proportionate earnings (EBITDA) beat its own guidance by 2% at mid-point but FY26 guidance (excluding Manawa Energy) missed Macquarie's forecast by -3%.
The FY25 dividend was also lower than the broker's expectation and the company guided to dividend growth in line with inflation.
Data centres
Along with Infratil’s renewables platforms, Citi highlights the growth opportunities at CDC Data Centres (CDC), originally known as Canberra Data Centres.
In early 2025, Infratil and its partner, Australia’s Future Fund, jointly acquired an additional 12.04% stake in CDC from the Commonwealth Superannuation Corporation, bringing their respective stakes to 49.75% and 34.55%.
Morgan Stanley highlights CDC management’s ability to secure sites, manage construction and development, and leverage established relationships with hyperscale customers.
Overall, Infratil’s largest business exposures are CDC at 40% of book value (NZ$7.2bn), New Zealand telco provider One NZ (telecom and broadband services) at 20% (NZ$3.7bn), Longroad Energy at 12% (NZ$2.1bn), and Wellington Airport at 5% (NZ$0.9bn).
An independent valuation in late 2024 uplifted the value of Infratil’s CDC stake by NZ$753m (circa NZ$0.84 per Infratil share) in just six months.
CDC is valued below Australian peers, highlights Citi, despite a larger and near-term secured pipeline. There are currently 23 data centres, of which 15 are operational and eight are under construction.
The company will develop its first Western Australian campus, a 200MW high-density facility 20km south-east of Perth CBD given AUKUS-driven demand for AI and security workloads.
Following this news in mid-August, Jarden estimated total projected capacity across the CDC portfolio had risen to around 2.65GW by FY34, up from 2.43MW on June 30.
Morgan Stanley considers Infratil’s land bank underappreciated by the market, despite supporting more than 1.5GW of capacity.
Around 80% of the forecast revenue to FY27 for CDC is contracted already, giving good visibility on the growth in earnings, explains Citi.
Last month, Morgan Stanley noted the market did not believe the current high growth in data centre demand in Australia was sustainable. It was also sceptical high EBITDA margins and attractive return on investment (ROI) targeted by Infratil (and other operators) would be sustained.
Supporting factors for CDC
Macquarie notes the Federal Government’s shift toward supporting digital infrastructure, particularly through NSW’s new Infrastructure Delivery Authority, has created a more favourable regulatory backdrop for established operators such as CDC.
The broker highlights CDC’s unique sovereign hosting certification, which makes it the sole provider able to service Australia’s highest-level Federal government data needs, with 30% of revenue tied to government contracts and new certification milestones now extending to New Zealand.
The analysts add CDC reduces obsolescence risk by conservatively managing facilities, supporting long-duration and AI tenders, while its modular design ensures capital investment is closely aligned with demand.
CDC has also achieved net carbon zero certification in New Zealand, strengthening its position in markets with strong renewable energy supply and favourable conditions for accelerated expansion.
Renewables
Infratil has stakes in four global renewable businesses: Longroad Energy in the US, Singapore-based Gurin Energy, Galileo Green Energy (pan European), and Mint Renewables, an Australian developer of wind, solar and storage projects.
As at March 2025, Longroad’s operational portfolio had expanded to 3.2GW. Its development pipeline is nearly 10 times larger at around 30GW, weighted heavily to solar and battery projects (over 90%) with a small but growing share of wind developments.
Citi posits renewable developer, owner and operator Longroad Energy and renewable platform Gurin Energy provide embedded cash flow expansion and material long-term value creation.
The US Energy Information Administration (EIA) forecasts renewable energy consumption to grow at 3.5% compound annual growth rate (CAGR) from 2024 to 2050, led by solar at 8.8% and wind at 6.1%.
Growth is expected to be even stronger in the near term, highlights Citi, with solar consumption rising at circa 18% per year and wind at around 8% per year over the next five years.
Morrison & Co
As an investment company, Infratil has unique characteristics, points out Morgan Stanley. As a result, assessing the manager of the fund is critical.
In Morrison & Co, which is responsible for Infratil's management and administration, the broker sees a history of consistently generating incremental shareholder value.
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