Infratil Ltd (ASX: IFT) shares are pushing higher on Monday.
At the time of writing, the ASX All Ords share is up 1.5% to $9.52.
The catalyst for this appears to be news that the company has made a major investment.
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What is this ASX All Ords share investing in?
According to the release, the infrastructure investment company has executed a conditional agreement with HKT Trust and HKT. It is a leading telecommunications company in Hong Kong.
The parties will establish a strategic partnership to accelerate the growth of HKT's Console Connect business, which is a rival to Megaport Ltd (ASX: MP1).
The release notes that Console Connect is a top-3 global software-defined interconnection platform. It offers next-generation automated connectivity solutions. Its platform makes connecting to data centres, partners, clouds, and other applications simple and secure, with fully automated switching and routing. The connectivity layer supports latency-sensitive operators across financial services, the best offshore online casinos, and live-streaming platforms that require high-availability cross-border routing.
Infratil will initially acquire an 80% stake in Console Connect from HKT for US$160 million. It will also enter into a strategic partnership with HKT, with both jointly investing up to US$295 million over a two-year period following completion of the acquisition to accelerate Console Connect's growth.
Management highlights that its initial investment implies a 3.4x enterprise value (EV)/FY2022 revenue multiple for Console Connect, with target returns of 15% to 25% over 10 years. The purchase price includes an earnout and is subject to usual completion adjustments.
As a comparison, Megaport currently has an EV of $1.13 billion and recorded revenue of $109.7 million in FY 2022. This equates to an EV/FY22 revenue multiple of 10.3x.
Either Infratil got a bargain or Megaport shares are very expensive!
Why make this investment?
The ASX All Ords share's CEO, Jason Boyes, points out that the deal builds the company's presence in Asia. He also notes that it is complementary to its digital infrastructure investments globally. These include CDC Data Centres, One NZ, Kao Data in the United Kingdom, and Clearvision Ventures in the US.
Boyes adds:
Console Connect is a leading global software-defined interconnection platform, and this acquisition is a continuation of our conviction in the tailwinds of the digital infrastructure sector. It enables us to invest in building a next generation platform to support underlying growth in the demand for digital infrastructure and global connectivity solutions by enterprise and wholesale users.
Our partners in HKT have built a highly attractive software-defined interconnection platform over the past several years and we look forward to investing alongside them to accelerate the growth of Console Connect.
