Why Infratil?

I recently brought some more Infratil after its share price declined from a high of $16.14 to around $13. Its share price now is trading at a significant discount to its net asset value of $16.26. I have increased my shareholding in IFT by about a third. They are one of NZ's largest listed companies, with a current market cap of $13.2B NZD. They have $20.6B in total assets. These assets consist of CDC Data Centres, which is almost 50% of the portfolio. The next largest asset is One NZ, of which they are 100% owners. In FY26 One NZ paid IFT $180m in distributions. Longroad Energy is a large Boston headquartered renewable energy provider and has recently had their 400MW Thousand-Mile project start operations, supplying power to a Meta Platforms data centre. These core portfolio companies are balanced out by Contact Energy, Kao Data, Qscan, Wellington Airport, Pacific Radiology and Gurin Energy. Around 50% is growth focused and forward leaning, like CDC; while the other 50% is cash-generating and in cash (from their May 2026 partial Contact Energy sale).

In the coming days and weeks, I might regret buying more IFT as there seems to be a sell-off in AI related stocks at the moment. But over the long term I doubt that I will regret buying more IFT, so long as I don't panic sell. The panic around AI started in September, as concerns were raised around the enormous consumption of power needed for AI data centres. The concerns with AI continued when Open AI indicated relatively poor revenue guidance. CDC also recently reported a slowdown in revenue, after many quarters of exceeding expectations. It is important to note though, that CDC are an agnostic provider of data to whoever needs it. They are not leveraged to any one company or strategy. They are the largest provider of data in NZ and Australia and have a solid economic moat in those geographies.

One NZ, while being a low growth telecommunications company, occupy an important part of the portfolios cash flow generation. In saying this though, they do have a partnership with Halter, helping dairy farmers to run their farms more efficiently. And they also have a partnership with Starlink to help improve rural connectivity. It is because of partnerships such as these, that I think they can beat Spark and 2degrees for market share in the NZ telecommunications industry. So not only are those $180 million in distributions safe, I think they will grow. Likewise, Wellington Airport is an important low-growth cash flow contributor. And while the Wellington population is meant to stagnate over the next decade, I think the lengthening of the airports runaway and resulting new international connections, will enable the airport to continue generating cash flow for Infratil.

Gurin Energy, Longroad Energy and Contact Energy, have all been signing up new long-term contracts. Gurin's Jindo Green Solar Project will provide 216MW of renewable energy for a Korean tech company. Longroad Energy expects to double its approximately 7GW of operating and in-construction assets by the end of 2026 and to 14GW by the end of 2029. Contact Energy is in talks with CDC to provide power for their proposed data centre in Taranaki. As the price of fossil fuels skyrocket, due to ongoing problems in the Middle East, renewable energy will become more attractive by comparison.

The average price target of Infratil held by 8 analysts is $17.22 to $17.56. They are dual listed on the ASX, which gives them access to additional capital. Approximately 70% of their earnings are generated offshore. Of their portfolio companies; One NZ (16% of the portfolio), Contact Energy (4% of the portfolio), Wellington Airport (5% of the portfolio) and CDC's NZ data centres, generate earnings in NZD. If the NZ dollar continues declining, particularly the NZD/AUD and NZD/USD rates, this will give further uplift to Infratil's bottom line. They have a BBB+ credit rating, and $1.4B of available liquidity. This liquidity provides them with a buffer against a possible market shock. Since their founding in1994, Infratil have been well managed by Wellington-based infrastructure investment manager Morrison. Their target shareholder returns are 11-15%, and over the last 10 years they have exceeded this target range by delivering 22% annual returns. Their portfolio is well balanced for the future, combining growth-focused companies with steady cash flow generators. For these reasons, I am comfortable with increasing my shareholding in Infratil.