Digital 9 Infrastructure Share Discussion Threads

[williamcooper104] 30/1/2024 15:16

Not really - sell Verne and it can't be zero as that's most of the recourse debt taken care of

[loglorry1] 30/1/2024 15:08

Well my fibres are tingling now! Bought more at 24.7p - last lot for me now I have quite a few. The news that Verne is expected to close is very significant. Just hope they meant it!

What's Arqiva worth? I dunno but not zero!

[spoole5] 30/1/2024 13:52

Market thinks this is going to zero. Fantasyland expecting above 50p

[marlint111] 30/1/2024 12:37

I think the big question is around Arqiva valuation. Reluctance of DGI to put it up for sale reinforces this - they are obviously hoping they can get a better price if they push the sale for 12 months.

So the question is - why would this be. Its obvs not been generating free cash as they might want- high inflation has required accretion payment.

But- you would think any reasonably sophisticated investor could look through that, with inflation coming down etc.

Possibly they want to get through the residual uncertainty about the digital tv switch off (currently planned for 2034), which Arqiva are campaigning to delay to 2040 ( hxxps://www.broadcast2040plus.org/ ).

Or they might feel that another year of growth of the smart meter business will paint a better picture of the potential on offer there.

Ultimately its clear they feel that if they were to try and sell Arqiva today- they'd be looking at a hefty discount on the price paid

[bdbd11] 30/1/2024 11:47

I've bought today for the first time. Commiserations to long term holders. However, with a NAV of £1 a share, buying in at around a quarter of that seems madness. There's no doubt the assets will be sold of at a discount to nav, but it's hard to see much risk at this level. Double money as a minimum seems realistic. After losing in QPP some time back, I managed to make a fair chunk back by buying in to Watchstone Group (their new name) as they wound up that their holdings. This seems to be a not dissimilar situation. It'll certainly take time, but double money over perhaps 12 to 18 months is pretty good. Best wishes all.

[tigerbythetail] 29/1/2024 18:14

Yes, a classic case of two analysts coming to diametrically opposite opinions based on the same information!
I have to say the Stifel analyst seems to be unable to see the wood for the trees.
I'd love to know how Macquarie currently value their own stake in Arquiva!
Anyhow, I'm glad I bought in today at what must be near the lows for this share. It may take a little while, but (barring the outbreak of WW3 or a major market crash or similar black swan event) I'm confident that these shares are worth more than 50p each. Comfortably more.

[spectoacc] 29/1/2024 16:41

Citywire well worth a read, particularly for the divergent analyst comment:

[jg231] 29/1/2024 12:58

RNS today on Outcome of the Strategic Review:

Further to the announcement on 27 November 2023, the Board of Directors of D9 (the "Board") has concluded its strategic review in respect of the Company (the "Strategic Review").

Managed Wind-Down

Following careful consideration of the options available to the Company and after consultation with its financial advisers, as well as taking into account feedback received from a large number of shareholders and institutional investors, the Board has determined that it would be in the best interests of shareholders as a whole to put forward a proposal for a managed wind-down of the Company (the "Managed Wind-Down").

The Board intends to publish a circular to shareholders (the "Circular") in the coming weeks in order to convene a general meeting at which it will seek approval from shareholders to amend the Company's investment objective and policy. If approved, the Board will then endeavour to realise all of the Company's assets in a manner that maximises value to shareholders.

Next steps for the wholly-owned assets (Aqua Comms, EMIC-1, Elio Networks and SeaEdge UK1)

The Board intends to immediately commence sale preparations for the Company's wholly-owned assets ahead of launching competitive processes later this year. The Board is mandating advisers to assist with the preparation of these sale processes.

Next steps for Arqiva

As part of the Strategic Review, various options for realising the stake in Arqiva have been considered on a preliminary basis by the Board. After careful consideration of Arqiva's business plans and current market conditions, the Board believes that the maximisation of the value of D9's stake in Arqiva is likely to take longer to realise than the other investments held by the Company. As such, while D9 will continue to consider and be open to all options for Arqiva which are value-accretive to shareholders, the Board has decided to defer a sale process for D9's stake in Arqiva for the time being. The Board will continue to explore various options including capital markets alternatives.

Amendments to Investment Objective and Policy

The implementation of the Managed Wind-Down will require amendments to the Company's investment objective and investment policy ("Investment Policy"). Such amendments are subject to the approvals of the Financial Conduct Authority (the"FCA"), shareholders pursuant to Listing Rule 15 and the revolving credit facility (the "RCF") lenders. The RCF lenders and FCA have been notified of the proposed new Investment Policy. The Board intends to publish the Circular by the end of February (or as soon as possible thereafter following receipt of approvals from the RCF lenders and FCA) to convene a general meeting at which it will seek approval from shareholders of the proposed new Investment Policy by way of ordinary resolution.

The proposed new Investment Policy will be one of effecting an orderly wind-down of the Company with a view to maximising the value received from the Company's assets and making any returns to shareholders, once the RCF has been repaid. The Company will not make any new investments save that investments may be made in existing portfolio companies when considered appropriate to maximise value for shareholders.

Shareholders should note that during the Managed Wind-Down, the Company intends to maintain its investment trust status and listing. Maintaining the listing would allow Shareholders to continue to trade Shares during the Managed Wind-Down.

The Board could reconsider the listing status of the Company following completion of the Managed Wind-Down depending on the actions chosen for Arqiva and the Verne Global earn-out at that time.

Shareholder returns

The Board expects to use the proceeds from the Managed Wind-Down to repay the amount of the RCF that will be outstanding following completion of the sale of the Verne Global group of companies ("Verne Transaction")[1].

Once the RCF has been repaid, the Board will review the potential allocation of any remaining proceeds between the repayment of the indebtedness to the vendor in respect of the Company's acquisition of its interest in Arqiva in October 2022 and distribution to shareholders. No further dividend distributions are planned in respect of the year ended 31 December 2023 and none are foreseen in the medium term. To the extent possible, it is intended that any cash distributions to shareholders will take the form of returns of capital.

Further, the Company's liquidity constraints prevent it from being able to give consideration to the implementation of a program to buy back shares in the market at this stage.

Consequences of the amendments to the Investment Policy not being approved

The Board considers the Managed Wind-Down as likely to provide the best opportunity to maximise value for shareholders going forward. However, in the event that the amendments to the Company's Investment Policy which are required to facilitate the Managed Wind-Down are not approved by shareholders:

· the Board and the Investment Manager will continue to comply with the Company's current Investment Policy; and

· the Board will work with its financial advisers to identify alternative options for the future of the Company.

Charlotte Valeur, Interim Independent Chair of D9, said:

"Throughout the strategic review process, the Board's primary objective has always been to maximise shareholder value going forward. Having carefully considered a number of options, we have ultimately concluded that a Managed Wind-Down of the Company is likely the best route to achieve this objective and seek to address the discount to NAV that impacts our shareholders.

The Board will assess the progress of the proposed asset sales on an ongoing basis and will continue to monitor other potential opportunities to realise income and capital value for shareholders as they arise. We will also continue to engage in active dialogue with our shareholders throughout this process."

A further announcement will be made when the Circular is published.

Relationship with Triple Point Investment Management LLP ("TP")

The company is party to an investment management agreement (the "IMA") with TP, which supports the management of the Company's portfolio of investments and the provision of certain other ancillary services to the Company. The terms of the IMA include a provision that "The Company or the Investment Manager shall be entitled to terminate this Agreement upon giving to the other party not less than twelve (12) months' prior written notice of termination, such notice not to expire before the fourth anniversary of the date of Admission (the "Initial Period")". The fourth anniversary of the date of admission is 31 March 2025. The Company has advised TP that, subject to any required consents, it presently intends to give notice to terminate the IMA under the above provision, with any such notice of termination to be issued on the later of 31st March 2024 or the closing of the Verne transaction (the "Notice Date"). The Verne transaction is scheduled to receive all the required approvals by the end of Q1 2024. Pending the Notice Date, the Company is actively exploring with TP whether the Company and TP might agree revised commercial terms that would be in the best interests of the Company and its shareholders given its future needs in the context of the other matters set out in this announcement.

Verne Global update

Verne Global Transaction

The Verne Global sale, announced on 27th November, 2023, is progressing towards completion with all required approvals expected to be received by the end of Q1 2024. The unconditional Finnish merger control clearance from the Finnish Competition and Consumer Authority has been received. All other completion workstreams, including those related to financing, are being advanced and on track within the expected timeline.

A further update will be provided in due course.

Deferred Consideration Payment

The new power agreement is being progressed and on track with the expected timeline. The US$25 million (approximately £20 million) deferred consideration payment will be payable on the earlier of (i) 15 business days after a new power agreement is entered into (subject to closing) and (ii) the later of 26 April 2024 and four weeks after closing.

Portfolio Update

The Board will release a trading update in the coming weeks, ahead of the publication of full year results for the year ended 31 December 2023.

As part of its reporting of the results for the year ended 31 December 2023, the Board has mandated an independent valuer to guide the Directors' assessment of the fair value of its assets under International Financial Reporting Standards, including the Verne Global potential earn-out payment of up to $135m.

Shareholder Webinar

A webinar will be held on Monday 5 February 2024 at 12 noon GMT. Further details will be provided closer to the date. Questions can be submitted by email to: [e-mail] up to 5.00pm on the day prior to the webinar.

[donald pond] 29/1/2024 12:50

spoole,
I disagree 100% with your comment.
There is only one thing that affects share price: supply and demand. That has been out of kilter for investment trusts for a long time. The link up of Investec and Rathbone, for example, means any funds that aren't capable of being bought in bulk are being sold. The same applies across the board as asset managers are using model portfolios to show clients are being treated fairly. Again, driving investment to the biggest, most liquid asset classes.
There used to be special situations funds that would buy situations like this. Not any more.
So in short, it is a sector with very few buyers. But there are always sellers, as people die, or those not following the story throw in their cards. We simply have no idea what a "credible" valuation is.
Look at CHRY today: NAV around 143, all the businesses going great guns, the comparable quoted peers in the US up 150% last quarter: the UK market doesn't notice it.
All of these funds are going to end up being wound up. There is precious little sensible price discovery in the UK market.

[spoole5] 29/1/2024 12:42

Clearly not credible or they'd be much higher. Pointless pluck an imaginary figure out of the air time.

[ghhghh] 29/1/2024 12:20

Peel Hunt estimate

Bear case 61p assuming no earn out and 20% reduction in carrying values.

Base case 83p assuming no earn out.

[wskill] 29/1/2024 11:41

Seems this is your twitter page donald

[donald pond] 29/1/2024 11:19

hxxps://x.com/DonaldPond6/status/1751927967108755717?s=20
I never know how to post images here but here's the Liberum sum of parts valuation for DGI9

[boystown] 29/1/2024 10:07

I think you're right marlint111 and I think other posters make sound points about mistakes made. But we are where we are - so what next? In trying to pin the tail on the donkey with a blindfold - what's the outcome from here; 50pps? This is what we have to do our best to guesstimate as investors.

[marlint111] 29/1/2024 09:59

I think the next interesting thing will be the results of the independent revaluation as part of the end of calendar year results.

Gut feel is there's going to be some big cuts here- mostly because it'll be easier to cut the valuations, and then sell for close to book NAV, than to try and justify selling off assets at a big discount to NAV later in the year.

I'm also interested to see what value they put on the Verne earn out- as we still haven't had any detail about the performance hurdles here.

[donald pond] 29/1/2024 09:31

Appalling communication. That you think Arqiva will soon be profitable sums it up. I hope you are right. But iirc all we have been told is that the dividend is secure and will be maintained (after I had suggested to them that they suspend it) then six months later oh no it isn't And the manager presumably still getting paid based on a NAV which is either massively wrong or has been explained so incompetently that nobody believes it

[marlint111] 29/1/2024 09:27

@donald honestly- I think it's the combination of the whole piece. You can get away with making a mistake in isolation (e.g. the Arqiva accretion payment).

But when you make two big ones (arqiva accretion and verne capital requirements) on your two biggest holdings. And then compound that by trying to maintain the dividend far too long- you just look like Muppets.

This then compounded by ftse 250 exit. And all the private wealth advisors who bought in heavily based on the future of nice stable divs etc running for the exit.

You end up with a perfect storm!

[marlint111] 29/1/2024 09:24

@alan - The market does seem to suggest so. But I find it so tricky to untangle the share price action into a concrete reason. If it was just the arqiva deal- why has it taken so long for the share price to react- all the accretion info was ages ago.

[donald pond] 29/1/2024 09:22

But Marlin, do you seriously believe that the price has fallen because Verne is doing so well? That if only it had been a steady state investment with no growth opportunities DGI9 would have a much higher share price? Sounds fanciful to meI hope Arqiva does start throwing off cash. But it was bought as a short term way of covering the dividend. So whatever else, the whole rationale for the purchase was utterly absurd.

[alan pt] 29/1/2024 09:21

@marlint111 I don't disagree that Arqiva should be a cash generative business and indeed this was the justification for the purchase

But it does seem that there was a significant overpayment and the failure to understand and account for the accretion payment compounded this

[marlint111] 29/1/2024 09:17

Alan- yes I agree it's very confusing how presented. If you dig right to the end of the annual and interim reports they say the capital deployed into Arqiva is 460 odd million.

But in the company summaries they define it as 300 million.

Either way- I'm confident based on the rest of the report it hasn't been written down 25% - indeed if you look at the 22 annual report you'll see the investment value was written up not down during that period.

[marlint111] 29/1/2024 09:15

Donald I think it's a complete misunderstanding to lay the blame for the underperformance solely at arqivas feet. It's been driven by liquidity concerns around the inability to forecast and finance the rapid growth of verne. That's been combined with the accretion payment debacle at Arqiva.

But- I'm strongly of the opinion that Arqiva going to start to throw off tens of millions annually to DGI9 pretty shortly.

[alan pt] 29/1/2024 09:12

@marlint111 I am using the exact figures from the DGI9 RNS's

Weirdly they frequently talk about the Arqiva "£300M acquisition" as if the VLN somehow doesn't exist. So I wonder if they kept the NAV up by some financial engineering around how they recognise the VLN?

[donald pond] 29/1/2024 09:10

It is a single investment that has derailed the whole trust. Given that the key virtue of trusts is to diversify risk, you have to conclude that they either did not understand the risks in the Arqiva transaction (negligence) or they did understand the risks and took them anyway (reckless). Trusts should only lose 70% of their value when they are frauds or bubbles.Not because of a single investment. That is what is unique here

[spectoacc] 29/1/2024 09:04

Worse - without Arqiva, Verne would have been fundable and wouldn't have had to be firesold.

But what's done is done - agree it's a sh*tshow for original investors, deserves to be wound up, but looks a potentially very decent return for those in more recently.

Still requires Verne approvals to all happen.