Digico Infrastructure REIT (ASX: DGT) reported a strong set of first-half numbers last week, and also announced it was accelerating its key SYD1 expansion project.
The team at Macquarie have run the ruler over the results, and while they've reduced their target price for the company, they still have an outperform rating on the stock and are bullish on its prospects.
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Positive operating result
More on that later. Firstly, to the results, Digico reported underlying revenue of $108 million, up 12% on the previous corresponding period, and underlying EBITDA of $57 million, up 15%.
The company will pay an interim dividend of 6 cents, in line with guidance, and its gearing is sitting at 35.8%, towards the lower end of its target range of 35-45%.
On the growth front, the data centre operator said existing capacity at its SYD1 site was now 100% contracted, "and broad-based demand has materially exceeded IPO expectations and validated the asset's strategic value".
An 88MW expansion project is now expected to deliver 15% yield on cost, the company said, and had been accelerated, "and will now be delivered in progressive stages over the next three years''.
Digico reaffirmed its full-year guidance for underlying EBITDA of $125 million, at the top end of its previous guidance of $120-$125 million, with full-year dividends of 12 cents per share.
Digico chief executive officer Michael Juniper said regarding the result:
Digico enters the second half of FY26 with strong momentum and a clear path to unlocking long term value. In the past six months, we have demonstrated the strength of our underlying platform, secured substantial new capacity, executed meaningful steps to simplify our operating model and materially accelerated our capacity expansion at SYD1. Every action we're taking is about closing the gap between Digico's net asset value and security price to ensure our market valuation reflects the underlying value of our assets and growing earnings base. We are focused on delivering sustainable, high quality growth for our investors.
Shares looking cheap
The Macquarie team reviewed last week's results and noted that the yield from the SYD1 expansion had improved from 12% to 15%.
They did, however, reduce their price target on Digico shares from $3.89 to $3.54, which, combined with the dividend yield, would be a total shareholder return of 67.2%.
The Macquarie team added:
Digico has posted some good runs on the board recently with … approval for SYD1, contract wins, and senior hires. Momentum is building, but the key to unlocking value is SYD1 capital recycling to demonstrate the inherent value of the asset.
Digico shares were changing hands for $2.08 on Monday. The company was valued at $1.21 billion at the close of trade on Friday.
