Market Yo-Yo | Infratil Gains on DataCentre News

8 October 2021

Global markets were higher overnight, with the US market (S&P 500 index +1.1%) rebounding from Monday’s sell off, as global market volatility remains elevated. 

Mega cap technology shares bounced back as investors piled back into Netflix which rose +5.2%, Amazon gained just shy of +1%, while Apple and Alphabet advanced 1.4% and nearly 1.8% respectively. Facebook shares rose +2% following a -5% decline on Monday due to a whistle-blower’s claims and a website outage.

Rising bond yields (the US 10-year Treasury bond yield is currently at 1.53%) and oil prices saw the financial and energy sectors perform strongly, with real estate and utilities. Stocks tied to the economic recovery, like cruise lines, airlines, retailers, also rose alongside the broader market.

European Markets (Stoxx 600 index, +1.2%) were up overnight, with banking stocks leading gains as economic reopening and prospects for tighter monetary policy both play in their favour.

Infratil (IFT:NZX / IFT:ASX)

Infratil shares rose +1.1% yesterday and has been on  a strong run lately  after announcing two separate additions to its business over the last two days.

The first leverages its partnerships with Auckland Radiology Group to create a national diagnostic imaging business – Infratil are contributing $30m-$60m for acquisition & will own 50.1%. The second announced yesterday, will be adding UK Data Centre Kao Data to its platform, committing £120-130m of growth capital for a 40% ownership stake, alongside two other shareholders. 
The transactions show us Infratil are actively deploying their capital from the Tilt energy sales and are looking to expand their infrastructure business into data and healthcare sectors which both have strong long-term tailwinds behind them. IFT retains NZ$800-900m balance sheet capacity for further purchases. 

We think yesterdays data investment is a sensible area of investment where IFT have proven capability and is clearly an area growing fast. Current customers (including NVIDIA) points to strong operational capability/platform already. The business is currently small in scale (~10% of the size of the CDC data centre business IFT owns), but IFT also see further development opportunities which would take it to broadly in-line with CDC currently. 

We remain BUY rated on Infratil as a top-quality infrastructure business with strong medium to long-term growth prospects.

Australia & New Zealand Market Movers

The Australian market was down on Tuesday (ASX 200 index -0.4%) as it got caught up in the global tech sell-off.

Tech stocks suffered harsh losses again with Afterpay down -5%, Appen slumping -5% and Zip Co down -4.8% – while other parts of the market experienced modest declines.

Energy stocks continue to charge upwards as the best performing sector of the day as the price of oil reached three-year highs as OPEC declined to increased production – with Woodside Petroleum share shooting up +4%, Santos up +2.5%, and Oil Search rising +2.3%.

The New Zealand market was down yesterday (NZX 50 index, -1.0%) as tech stocks globally sold off and investors await today's RBNZ interest rate decision.

Fisher and Paykel healthcare dragged the market lower down -3.3% as well as  a handful of other growth stocks sensitive to a rise in interest rates. Retirement village operators, property stocks and defensive gentiles were also weaker in anticipation of today's rate hike.

Fletcher building was down -1.8% after the NZIER Quarterly survey found views on the building sector has moved from optimistic to mostly pessimistic.

An Australia law firm Slater and Gordon has filed a class action against The a2 Milk Company on behalf of investors who bought shares over a 9-month period during which the infant formula maker posted four earnings downgrades and the shares plunged 62% – alleging the company engaged in misleading or deceptive conduct.


3 Things Markets will be Watching this Week

  1. Key events this week include RBNZ rate call this Wednesday, and RBA decision this Tuesday.
  2. ​US Non-Farm Payroll Data due later this week (monhtly employment figures)
  3. Covid and lock-down related news flow both sides of the Tasman.
Global markets were higher overnight, with the US market (S&P 500 index +1.1%) rebounding from Monday’s sell off, as global market volatility remains elevated.

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