Digital 9 Infrastructure Share Discussion Threads

[chucko1] 15/3/2024 08:33

Seemingly, very much a case of buy on the rumour, sell ...

But this rhymes with "perverse". I think.

[donald pond] 15/3/2024 08:30

Added here

[spectoacc] 15/3/2024 08:25

Nobody likes the Conservatives.

[riverman77] 15/3/2024 08:23

Market gone to sleep? This is now worth a minimum 30p, and that's on an extremely conservative basis.

[cyberbub] 15/3/2024 08:20

'Sell on news' morons... Gives others a chance to buy in...

[spectoacc] 15/3/2024 08:15

Down on the day..

[invisage] 15/3/2024 07:49

15 March 2024



DIGITAL 9 INFRASTRUCTURE PLC



("D9" or the "Company" and, together with its subsidiaries, the "Group")



Verne Global Sale Completion





The Board of D9 (the "Board") is pleased to announce that it has completed the sale of the Company's entire stake in the Verne Global group of companies ("Verne Global") to funds managed or advised by Ardian France SA ("Ardian") for an equity purchase price of up to US$575 million (approximately £450 million*) (the "Verne Transaction"), in line with the equity purchase price communicated by the Company in the announcement on 27 November 2023. Following the Verne Transaction's completion the Company has received US$415 million (£325.8 million) (the "Initial Purchase Price"). The completion follows receipt of all applicable regulatory approvals and the satisfaction of all conditions in line with the previously communicated timetable.



As noted in the Company announcement on 27 November 2023, the purchase price also comprises:



i. US$25 million (approximately £19.5 million*) of a deferred consideration payment which is payable on the earlier of 15 business days after the date on which a new power agreement is entered into and 26 April 2024 (the "Deferred Consideration"), and



ii. A potential earn-out payment of up to US$135 million (approximately £106 million*), which is payable subject to Verne Global achieving run-rate EBITDA targets for the financial year ending December 2026 (the "Performance Target"). The total earn-out will be payable if 100% of the Performance Target is met and will be reduced on a sliding scale with no earn-out being payable if Verne Global does not achieve 80% of the Performance Target. This target is as set in the business plan provided to all potential purchasers at the time of the sale process.



The Company believes that Ardian's own value creation objectives are aligned with deploying the requisite capital expenditures to enable Verne Global to deliver in line with or close to the Performance Target. The Company has no capital expenditure obligations to Verne Global going forward. The Company also benefits from customary protections to ensure Verne Global continues operating and reporting substantially in line with existing practices, including quarterly updates on its run-rate EBITDA achievements.



As previously announced, the Verne Transaction closing will enable the Company to significantly deleverage its balance sheet and provide the cash resources necessary for the Company to strengthen its financial position.



The Initial Purchase Price proceeds received will be used as follows:



· £273.5 million will go towards repayment and partial cancellation of the Revolving Credit Facility ("RCF");

· Up to £17 million will be used to pay costs incurred in relation to the Verne Transaction;

· Around £12 million will be retained to cover future operational expenses of the Company if and when required; and

· Around £23 million will be retained for prudent capital management to cover for possible future liabilities arising from certain Value-Added Tax related indemnification provisions and will be available for additional RCF repayment and cancellation if and when an insurance policy to cover these potential future liabilities will be taken out.



Following receipt of the Deferred Consideration, an additional repayment and cancellation of the RCF of approximately £19.5 million* will be made, reducing the residual RCF to approximately £80 million.



If approved by shareholders at the upcoming General Meeting on 25 March 2024, the Company intends to use equity proceeds generated by the orderly disposal of the Company's wholly-owned assets to fully repay and cancel the residual RCF.



* GBP amounts based on a 1.28 USD/GBP exchange rate as of 13 March 2024.

[tsmith2] 15/3/2024 07:25

that would explain yesterday's little whoosh.. should be a v good day here today

[livewireplus] 15/3/2024 07:01

Digital 9 Infrastructure PLC Verne Global Sale CompletionSource: RNS Regulatory News

[kamshafqat] 14/3/2024 15:25

Sorry table formatting / alignment all got removed when I posted

[kamshafqat] 14/3/2024 15:24

Thanks skinnypope - I agree on the Valuation Report as the next key event given Verne Sale & AGM realisation approval is very likely to go through IMO.

I also have some positions in DGI9 in both the private Investment portfolios I manage and my shorter term Trading accounts. I am positive on the Digital Assets sector (and have invested in both CORD and DGI9 in the investment portfolios) over the MT/LT and think that the price action in DGI9 represents an interesting short-term realisation opportunity.
I have seen some good posts on this IT over the last few weeks and wanted to add some comments and thoughts from my analysis:
* I think the sell-off is/was very much overdone - I would not be surprised if this was in the 45-65p context based on the info available now
* I think the case here is particularly interesting given the situation is far more due to poor management than any issue with underlying assets (as opposed say SLFR - formerly KKV and SQN even further back)
* On a previous post - I couldn't find full details on the these but I note that the Manager fee is in the £4mm context, and they will have wages, etc in addition to I see they have a large number of holding companies, underlying companies / SPVs that will all have associated costs
* I have run some analysis on the underlying portfolio (assuming the Verne Sale completes as expected Eo-Q1 and Realisation is approved at the AGM). To start, I have used the latest valuations from the last DGI9 report and info from the releases since then. This gives an estimated Post-Verne position as per below:
Value Verne Sell Post-Verne
PORTFOLIO £1,305 -£289 £992
Verne Global - Iceland £275 -£349 £107
Verne Global - Finland £136
Verne Global - London £69
Arqiva £508 £508
Aqua Comms £227 £227
EMIC-1
Elio Networks [Host] £58 £58
SeaEdge UK-1 £18 £18
Giggle Fibre £0 £0
Cash £14 £60.0 £74
DEBT -£544 £289 -£255
RCF -£373.8 £289 -£84.8
VLN -£169.8 £0 -£169.8
TOTAL £761.2 £0.0 £737.2

*I have then assumed that is takes 2Y to realise the all sales in the portfolio and assumed associated RCF Interest Costs, VLN Interest Costs, D9 Ops costs and Advisory costs (I assume they are keeping GS as advisors to sell).
=> This takes off another £85mm or so from the NAV

* I have then backed out the assumed discount to the underlying Portfolio values to calibrate to the current Market Price:
Market PX Calib
HV*(1+X%) -48.18%
PORTFOLIO £550
DEBT -£255
TOTAL £295
EXIT COSTS -£84
NAV £210.7
MARKET PX 24.36
=> This implies that the market assumed discount to latest valuations is c. 50% - which seems very steep given there is no reported information on drastic underlying company performance.

*Assuming some other ranges of realisation discount adjustments gives the below:
Bull Base Bear Stress
HV+X% HV+X% HV+X% HV+X%
-10.00% -20.00% -30.00% -45.00%
PORTFOLIO £900 £808 £716 £579
DEBT -£255 -£255 -£255 -£255
TOTAL £645 £554 £462 £324
EXIT COSTS -£84 -£84 -£84 -£84

REALISATION VALUE £561.2 £469.4 £377.6 £239.9
PX 64.87 54.26 43.65 27.73

Good luck all...

[horndean eagle] 14/3/2024 15:23

Upgraded by Stifel today. They have as their base case a full earn out on Verne. Quite bolshy to take that stance. Whether its IM driven or he has done it off his own back. Bodes well if others follow suit.

[alan pt] 14/3/2024 15:13

Thanks for that summary. Closest comparator CORD uses 9.8% discount rate (so DGI9 are distinctly more conservative there), trades on a 37% NAV discount (perhaps negatively impacted by DGI9)

If we apply the same share price discount to your 65p NAV, that would give a 41p SP, which seems more or less in line with what I'd guess as a possible top price in the near term (but more likely in the 30s given the negative hangover)

Was the recent dip the final bit of dumping? That would be a bold prediction given the history, but we can hope. My 20p limit buy has been sitting there in case, but hasn't triggered, must be about the only time I was actually too negative about the share price :)

[skinnypope] 14/3/2024 14:54

Nice to see the share price back off its knees today; given the hurdles being cleared for the Verne sale, I still see the short term price target of 30p, ceteris paribus.

Looking ahead, I will repeat the valuation report is in my opinion the next *very big* deal. The company announcement stated an "independent valuer" will formulate the report using IFRS. D9 already uses IFRS 13, and given the illiquid nature of the portfolio, all assets are Level 3 i.e. are valued using estimated cashflows and discount rates.

Quoted PE funds will all use the same methods, but the credibility level of those estimates can be measured by the NAV discount. D9 has certainly been hit with a much larger discount than all other funds, but that is partly due to the almost fatal cash burn. With the solvency issue now cleared, I think it's very smart of the board to appoint an independent valuer, as TP have ruined this company and their Level 3 projections will not be seen as credible.

To be fair to D9, the reports show a discount rate of 11.8% which seems quite conservative [I see the large infra funds like HICL/TRIG using rates of around 8%]. However against this I would also point out Verne selling for below NAV, or if the earn out does not crystallise, well below NAV.

As for my guesstimates, I see Elio and SeaEdge largely fairly valued. Beyond that:

- Aqua Comms I see maybe being down valued. The currently Red Sea situation must impact the EMIC-1 valuation, plenty of news articles on the current threat from the Houthi and the recent subsea cable damage.

- Arqiva I also feel be down valued slightly. EBITDA continued to slide in H2, with inflation linked revenue being eaten up by higher costs and lower priced broadcasting renewals. The smart water meter business is the bright spot, but that was almost certainly already in the projections.

I'll continue to set myself up for a fall and say my NAV excluding all Verne, is around 66p. Value attached to Verne could add anything up to 15p on top of that.

Let's see how close I get to that, although the main point to make is that whatever the new number is, it *should* spark a narrowing discount as it *should* be more credible.

[cyberbub] 14/3/2024 14:45

Has Mr Market not already built the Verne sale into the current SP? Or is there perceived to still be significant risk to the transaction completing?

[invisage] 14/3/2024 13:06

Fisternator

RNS of Verne sale can come anytime.

I prefer to think worst case and am thinking 11 trading days instead, would rather be positively surprised if it comes earlier. The point being though is 11 days is not long to wait but happy to see weaker hands depart, it will make the share price more firm when the news arrives.....

[marlint111] 14/3/2024 09:42

I agree. And I think if they've said by end of Q1 they are likely to be aiming for a date a week or so earlier in reality

[fisternator] 14/3/2024 09:36

Setting the above comments aside for one moment; is it not the case that the company said the transaction would complete before end Q1 in that last RNS, rather than on the last day of Q1?

My reading, that's possible incorrect was that the transaction could complete any day after that RNS up to 31st March?

The winding down company change vote isn't related to the Verne sale i don't believe, so no hold up waiting for that to go through?

So the Verne sale RNS could arrive at time?

Happy to stand correct.

[wskill] 14/3/2024 09:30

Still think that DGI9 must have at least 45p to 65p value in it certainly worth holding for this to be realised .

[invisage] 14/3/2024 08:28

Got rid of a lot of weak hands the past week....

Only another 11 trading days before Verne completes and hopefully another leg up in the sp!

[chucko1] 11/3/2024 23:51

I only very recently got involved with this (2 purchase - at 18.7p and 23.0p). It strikes me that it has been cheap all the way down from 40p to 16p, and that any bounce is pounced upon by sellers taking any opportunity of shedding some/all, as though a function of both owning too much and revulsion.

We are now just 10% higher than pre-announcement, which seems to be an inadequate return relative to the importance/likelihood of the Iceland outcome.

[spectoacc] 11/3/2024 15:01

I called the bottom at 30p so IMO DGI9 is the triumph of hope over experience, but two things I'm fairly certain about:

1. It's cheap;
2. The spike on the eventual Verne completion is going to be sold into by many of those who bought in anticipation.

Will look again if it gets back to about 18.5p, filling that gap.

[riverman77] 11/3/2024 14:40

Tempted to add a few more down here - now given up most of its initial 25% gain following the positive news on the Iceland approval. Can't be overstated what a positive development that was as it removes the only major obstacle to a sale, and once the sale goes through the investment case is largely de-risked and should be worth a minimum 40p.

[redhorse2020] 10/3/2024 15:03

Not planning to follow him. Too late for that as I'm already heavily invested in this one sadly. Just impressed he'd actually made money here and hoping this will finally turn a corner. I don't actually follow any investors - perhaps I should start! :-)

[genista71] 10/3/2024 13:45

James Carthew is a mouthpiece for the industry..he is not a good investor and definitely not one to follow!!