DigiCo REIT in tepid debut after marking Australia’s biggest IPO in six years By Reuters

By Sameer Manekar

(Reuters) – Shares in data center owner and operator DigiCo Infrastructure REIT hovered around their IPO price on Friday – a muted debut after it marked Australia’s biggest listing in six years.

DigiCo, whose IPO raised A$2 billion ($1.3 billion), was trading at A$4.935 in afternoon trading, slightly below its offer price of A$5.00. Earlier in the day it rose to A$5.10.

HMC Capital’s listing highlights growing investor appetite for data centers in the Asia-Pacific region driven by demand for AI-powered services.

However, its lackluster debut also points to concerns over the rich valuations that recent data center deals have commanded.

Morningstar last month gave DigiCo a “high uncertainty rating with a fair value estimate of A$3.40 per share. Its offering price assumes high rates of return, analyst Roy van Keulen said, adding that it was unlikely or unlikely to sustain given the competitive nature of the industry.

DigiCo manages a portfolio of data centers valued at AUS 4 billion across the US and Australia. It said it would use part of the IPO proceeds to buy two adjacent large-scale data centers near Sydney with a contracted capacity of 20 megawatts.

Asset manager HMC Capital, founded by banker-turned-investor David Di Pilla, retains an 18.2% stake in DigiCo.

The sector has had a lot of activity in Australia this year. A Blackstone-led consortium bought data center firm AirTrunk in a deal with an implied enterprise value of A$24 billion, while NextDC has launched an equity raising of A$750 million and sought to raise A$2.9 billion through debt. Pension giant AustralianSuper has also invested billions of dollars in the sector.

Howard Penney, co-head of real estate research at Citi, was bullish on the sector’s outlook, saying there was an “attractive structural growth opportunity for data center investment in Australia and globally driven by the rise of artificial intelligence, autonomous vehicles and higher demand for storage information”.

($1 = 1.5733 Australian dollars)