Shares in Global Data Centre Group (ASX: GDC) were purchased as the share price was trading at a significant discount to its assets.
GDC has been a strong contributor to the investment portfolio performance, with its share price increasing 93.6% over the 12 months to 31 May 2024, from $1.57 to $3.04, and the weighting of GDC has increased to 7.6% of the investment portfolio.
WAM Strategic Value initially invested in GDC as a discount to assets investment and significantly increased its investment once GDC announced an asset realisation strategy. This decision was made following a review focused on assessing the long-term viability of its investment structure, which will ultimately return capital to shareholders through the disposal of assets. This strategy has been successful to date, with the company having exited two thirds of its assets.
As part of its value realisation strategy, GDC announced the sale of Perth Data Centre for $39 million in April 2024. In May 2024, it also agreed to sell its co-controlled investment in the European data platform Etix to the French asset management company Infranity Equity Fund. The net proceeds from this divestment are forecasted to be around $175 million. On the back of this sale, GDC’s share price increased 35.1%.
GDC’s last remaining asset is its 1% stake in AirTrunk, which recently attracted interest from private buyers. The reported sale price for AirTrunk is at least $15 billion in enterprise value. Considering the debt in the business, the equity valuation would be $9 billion, making GDC’s 1% position worth approximately $90 million. We believe this will boost GDC’s underlying NTA. On a pre-tax NTA basis, assuming a $90 million exit for AirTrunk, this would represent an NTA of $3.25 when adjusted for the issuance of options to management. There is further upside for GDC as it realises the full value of its AirTrunk position.
WAM Strategic Value recently became a substantial shareholder in Australian Unity Office Fund (ASX: AOF). You can read about this in The Australian Financial Review. AOF is an ASX-listed real estate investment trust (REIT) that has been selling its property portfolios. Another discounted asset play within the investment portfolio, we believe the orderly divestment and return of capital to shareholders will act as a catalyst to re-rate the company’s share price.
