Cordiant Digital: A Small-Cap Opportunity in Europe’s Growing Data Infrastructure Market

With a market value of about £950million, Cordiant Digital Infrastructure has moved beyond the small-cap category. Its rise shows what can happen when a tightly protected niche is matched with capable, disciplined management.

Add a clear long-term vision and a little imagination, and Cordiant has evolved from a specialist investment vehicle into a serious presence among the market’s larger players.

Its business may lack the glamour associated with the technology sector, but it provides the essential foundations on which the digital economy depends. Cordiant owns extensive digital infrastructure across central Europe.

Its assets include mobile-phone towers, fibre-optic networks, television and radio transmission sites, as well as data centres that house the physical systems powering the internet.

In simple terms, Cordiant owns much of the unseen infrastructure behind the content people stream, the websites they browse and the files they download every day.

The company floated in 2021 and entered the FTSE 250 in June, making it the only London-listed fund giving investors direct exposure to this side of the digital growth story.

Buy, build and grow

Cordiant sums up its approach in three words: “buy, build and grow”.

It targets established, cash-generating infrastructure companies in smaller European markets, acquires them at carefully judged prices and then invests in expanding their operations.

The portfolio now consists of six businesses operating in Poland, the Czech Republic, Ireland, Belgium and New York.

Together, they control 1,440 communications towers, more than 14,000km of fibre-optic network and 24 data centres.

Two of its investments, Poland’s Emitel and the Czech Republic’s CRA, hold particularly strong positions in their domestic markets across broadcasting and mobile infrastructure.

Broadcasting generates the biggest share of income, with fibre networks contributing the next-largest portion. Towers and data centres account for the balance.

Cordiant paid an average of roughly ten times cash profits for the businesses, a relatively restrained valuation for infrastructure assets of this calibre.

The returns achieved since launch have largely reflected underlying business growth rather than a simple revaluation of the holdings.

Long contracts, a covered dividend

For investors, one of digital infrastructure’s biggest attractions is the visibility of its earnings.

Customers typically commit to long-term contracts, and Cordiant has around £952million in contracted revenue extending to 2044. A substantial portion of those agreements is linked to inflation.

That dependable income supports a dividend yield of approximately 3.5 per cent, which is comfortably covered, while also providing funds for further investment.

Since 2021, the fund has generated an average annual net asset return of 11.3 per cent, exceeding its minimum target of 9 per cent.

Its move to the main market and inclusion in the FTSE 250 have also increased its visibility and expanded the number of investors able to take a stake.

The team knows the territory, too. Executive chairman Steven Marshall previously ran the US operations of American Tower, one of the world’s biggest mast owners.

What the broker sees

Cordiant’s net asset value is put at 146p a share, yet the stock trades at 124p, a discount of around 15 per cent.

Panmure Liberum thinks that gap is far too wide. It has lifted its price target to 171p, from 120p, and rates the shares a buy.

The argument is that the accountants value Cordiant cautiously, using conservative cash-flow models that ignore what the physical assets would actually fetch if sold.

Add up the towers, fibre and data centres at prices similar buyers have paid elsewhere, Panmure says, and the business is worth nearer 179p a share.

That would be 44 per cent above today’s price.

Two growth projects, a large data centre near Prague and a tower-building programme in Poland, are barely reflected in the current figure.

Combine the potential re-rating with the dividend and the broker sees a total return of about 42 per cent over the coming year.

The risks

None of this is a certainty. The discount has proved stubborn, and it could stay that way if buyers remain unconvinced.

That creates a practical snag: Cordiant cannot easily raise fresh money by issuing shares below their asset value, which limits how fast it can fund those growth plans.

Building data centres and filling them with tenants carries execution risk, and the returns depend on that space being let.

Because the assets sit in Poland, the Czech Republic and Belgium, earnings arrive in zloty, koruna and euros, so a stronger pound would trim their sterling value.

Higher energy prices could squeeze margins if cheap power deals expire.

And investors have learned to treat headline asset values across the fund sector with a healthy dose of scepticism.

Still, for anyone who believes the world will keep needing more data, Cordiant is a rare, direct way to own the infrastructure that carries it, at a price its broker argues is simply too low.

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