Digital 9 Infrastructure Share Discussion Threads

[alan pt] 28/1/2024 15:16

The pressure to turn off terrestrial TV is so that the spectrum can be used for other purposes. Mostly (though not exclusively) those would also require transmission towers

Dig into Arqiva info and you'll already find other purposes and revenue streams, like the growing meter data business

Anyway, I think DGI9 will be dead and gone decades before you need to worry about the Arqiva transmission business!

[tigerbythetail] 28/1/2024 13:57

Big picture, DGI9 still puzzles me.
I get that the managers have made elementary mistakes - failing to match duration, failing to consider the rise in interest rates, and allowing the value of DGI9 to become completely detached from its NAV, thereby making an equity raise difficult.
I also get that a lot of institutional investors must be embarrassed to own such a poor performer, and that their own investment mandates may be forcing them to sell such a loser, and that selling may be begetting more selling.
I also get that simply selling off all the assets (even at a hefty discount) and returning, say, 75% of NAV to all shareholders is actually not all that simple to do. Things like the earn-ins and the need for regulatory approvals (let alone the volcano) complicate the picture. And, anyway, it's humiliating for the managers to adopt this course of action, and they may want to put off the ugly moment for as long as possible.
But I just don't get why DGI9 should be trading at more than 50% discount to NAV.
Surely this c. 75% discount is panic driven and way overdone?
Or am I missing something crucial?!?

[loglorry1] 28/1/2024 12:46

I'm hoping Maquarie did the math on this when they invested. Having said that you can imagine you could turn off 90% of the transmitters where there is internet very quickly.

I think the license is up for renewal soon.

What a mess DGI9 is. It does feel like we are missing something on valuation. It surely can't all be down to the risk of Verne happening.

[tigerbythetail] 28/1/2024 11:44

Hi Popit!
The answer would seem to be that terrestrial TV is set to end in 2034, when the current licence ends. There is a campaign to extend this to 2040+, chiefly on behalf of remote rural areas, but I don't know how much traction this has.
It's worth noting that only 15% of UK households are currently "internet only", so there is still plenty of demand for TV delivered via aerials.
I can't imagine how Arquiva could repurpose TV transmitters, so yes, this part of their business will sunset in time. But not all that soon!

[feddie] 28/1/2024 10:33

Can't read because of paywall but the spirit of the BBC is to reach everyone in the UK. There are people and places that will not have a reliable internet connection until something like Starlink becomes what ADSL or fibre are now. That feels like a long time.

[popit] 27/1/2024 21:12

Does anyone know how the expected switch-off of terrestrial TV and Radio is going to affect Arqiva ?

Presumably all of their TV transmitters and infrastructure will not be needed after the switch-off ?

So will the switch-off not be a huge negative for Arqiva future revenue and profits and business model ?

Is there going to be any need for these TV transmitters and infrastructure in the future ?

[marlint111] 26/1/2024 20:19

Yes- @williamcooper - you could sell the rights to the earn out to a third party. e.g. if they reckon 50% chance earn out hit then you'd be looking at earnout * 0.5 * some discount percentage.

Interesting news @legaleye - I can't see what the updated could provide that won't be positive for the share price- at the moment it feels like the almost complete collapse of all the holdings is baked in!

[legaleye47] 26/1/2024 19:48

I had this reply from Triple Point’s IR today:

“To provide shareholders with ongoing information, the Board will be giving regular updates about D9 on a monthly basis, starting at the end of January.”

So hopefully an RNS next Mon-Wed that provides some clarity on where things stand with Verne sale, RCF and plans for the other assets. Fingers crossed we get some positive news!

[williamcooper104] 26/1/2024 17:18

They'll argue that but no reason why you just don't need a few accountants to argue/check the earn out

[alan pt] 26/1/2024 17:17

Except they can't do that for over three years, due to the deal they struck on Verne...

[gonsan] 26/1/2024 16:42

Exactly, sell it all and close the shop

[donald pond] 26/1/2024 15:42

I think Rathbones and Investec had some sort of tie up that may be leading to rationalisation across the sector and it's hard to see DGI as a preferred buy. We need Richard Boleat to deliver with his valuation committee. If the valuation is at all accurate then there must - by definition- be buyers at that price. In which case - sell it all

[spectoacc] 26/1/2024 15:14

It's a disappointing investment for everyone when it's making ATL's.

[gonsan] 26/1/2024 15:13

To be honest, and given what we have seen with the management, I rather they sell the assets at a price not too low below nav and distribute the moneys to the shareholders. This is such a disappointing investment for me

[marlint111] 25/1/2024 13:59

My suspicion (and it may be more hope than judgement!) - is that a lot of the share price weakness is being caused by the nature of the shareholder base.

hxxps://uk.marketscreener.com/quote/stock/DIGITAL-9-INFRASTRUCTURE--120803508/company/

Lots of the major shareholders are private wealth / asset management companies. They've taken big positions over the last couple of years- and are now looking to clear out what has been an embarassing investment at any price. Rathbones are the only ones above the 5% notification thresholds.

If you look at the nature of the buys/sells being reported every day- the sells tend to be a few big ones in multiples of 100k - the buys tend to be smaller and more random numbers (probably PIs picking up shares).

Unfortunately no reason to expect this dynamic to change until we have some news on the sale - this will boost volume and help those looking to sell to exit a bit faster.

[marlint111] 25/1/2024 12:41

I think the geological risk is vastly overblown here. The others I agree on - the main assumption that broke was they'd continue to trade at or about NAV. If they had then they'd have been able to raise more equity to see them through to some of these assets churning out more cash.

Verne they just underestimated the growth capital requirements

[xxx] 25/1/2024 12:37

@marlin Yes, they mentioned this in a presentation and it highlighted to me at least, the head long rush to gather assets, rather than due consideration of the possible adverse sequelae from concentration.

They were expecting or even discounting further equity inflowsand ignoring the other risks [geological, interest rate, liquidity].

[marlint111] 25/1/2024 12:31

@xxx - I believe they chose to sell down Verne rather than anything else, as it both had a large capex requirement, and was already a large % of the portfolio. So keeping it and selling down something else would have potentially meant breaching ownership concentration covenants etc.

The idea was initially to only sell a minority stake - but couldn't get that through.

[tigerbythetail] 25/1/2024 12:17

I must admit I'm puzzled as to why the managers haven't got rid of the building lease yet.
I know that would only make a small hole in the debt but surely that would be an easy enough sale?
All told I'm bewildered by the managers' actions and inactions. Luckily I'm only looking on, so I can be emotionless about their apparent incompetence. If I'd bought in at 100p+ I'd be livid.

[xxx] 25/1/2024 12:03

Interesting discussion here, so I'd like to ascertain views on:

1/ Why Verne Global was selected to sell, when the co. knew Iceland was an evolving situation, leading to more deal completion uncertainty and thus eading to the co being in a much weaker position , should it need to sell another asset , due to the deterioaration in financing, ticking clock and the stench of rotting strategy.

2/ Why has no one moved to sue the manager for their lack of circumspection in asset gathering ?

[tigerbythetail] 25/1/2024 12:01

Right now this seems bottomless.
I don't get this at all. Yes, the managers have foolishly overextended and assets need to be sold to pay off the revolver. But the share price now has become completely detached from NAV.
Is the Verne sale going to collapse shortly, for any reason? Is Verne actually unsaleable?
Or, is/are one (or more) of the other assets in trouble and hopelessly overvalued? If so, which one(s)?
Is it impossible to find any buyers (even at a decent discount) for any of the other assets?
Or is a major shareholder selling down automatically because of a breach in their investment mandate, and is selling begetting selling here?
All answers welcome, because this one is a head-scratcher for me!

[marlint111] 25/1/2024 08:54

I think you're right Bagpuss- in that I can't see any other reason for the share price weakness.

From the Verne announcement:

"Pending receipt of the Purchase Price, the Company will seek to secure a financing solution to fund Verne Global through to closing of the Verne Transaction. As part of prudent contingency planning, the Company will also be developing a plan to address its residual financial uncertainty (as disclosed in the Interim Results for the period ended 30 June 2023) pending receipt of the Purchase Price."

No such financing solution has been announced so they must either have decided they don't need it (unlikely), or perhaps struggling to raise it? But that seems odd given there's a signed deal in place - you'd think it'd be quite low risk for a lender.

[bagpuss67] 24/1/2024 22:22

Shareprice acting like a rescue raise or D4E or something equally bad.. Like Williams price chip.... Grim..

[rambutan2] 24/1/2024 20:30

I wonder what sort of valuation the other Aqiva shareholders are holding it at, in particular Macquarie with its 25% held in MEIF 2. Looking at what must be a very stark disparity in their valuations and what the mkt is valuing it at in DGI9, perhaps a few of the LPs might raise an awkward query. I've had no luck trying to summon up a MEIF 2 factsheet/report. In any case, it was just something that occured to me as I was pondering on DGI9's rapidly diminishing mkt cap.

[bagpuss67] 24/1/2024 10:59

Surely someone would put up a bridge.. At a price though I admit.