IFT - Infratil

[Basil]

It certainly participated in the 2024 rally, exploding from $9.86 to $13.27, with about half of those gains coming post the Sept breakout.

But yes, the data centre hype has been revealed as just that, hype.  See the sell off in NXT as well. 

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A series of lower high's and lower lows in recent months looks pretty ominous.

[LoungeLizard]

A series of lower high's and lower lows in recent months looks pretty ominous.

If your timeframe for investing is recent months then yes, ominous. But IFT's long term graph is one of steady growth with only a few blips. One can't be complacent at any time with any stock, but iFT's growth has been as solid as they come. The current drift downwards is, in my view, just a normal correction to an SP that got a little ahead of itself. Trying to suggest it has something to do with "datacenter hype" is pure speculation.  If or when the datacenter market does look to become saturated, then I would expect IFT to sell down its interests at a very healthy profit, just as they have done with other assets.

[BlackPeter]

If your timeframe for investing is recent months then yes, ominous. But IFT's long term graph is one of steady growth with only a few blips. One can't be complacent at any time with any stock, but iFT's growth has been as solid as they come. The current drift downwards is, in my view, just a normal correction to an SP that got a little ahead of itself. Trying to suggest it has something to do with "datacenter hype" is pure speculation.  If or when the datacenter market does look to become saturated, then I would expect IFT to sell down its interests at a very healthy profit, just as they have done with other assets.

Hmm - datacenters seem to approach the end of their bubble. Windmills seem to be unpopular during the time of dumb right monsters taking power all around the world (though I don't understand, what the poor windmills have done to them, but anyway), and lets face it - airports will have a difficult time as well with global warming on the rise and 1.5 degrees out of the window. Flight shame.

Does not mean that IFT will be out of business, but markets might start wondering, whether it is really worth the premium they were prepared to pay over the past decade or so.

Similar problem like Spark. Just a move back to a more decent PE ratio, nothing serious, but clearly painful for holders.

[LoungeLizard]

IFT targets 11-15% total shareholder return over a ten year rolling period. In the last ten years it has achieved 21.4% yearly return. That's why the stock has been worth its premium. If it continues to achieve those returns the stock will continue to go up, the odd blip notwithstanding.

[BlackPeter]

IFT targets 11-15% total shareholder return over a ten year rolling period. In the last ten years it has achieved 21.4% yearly return. That's why the stock has been worth its premium. If it continues to achieve those returns the stock will continue to go up, the odd blip notwithstanding.

Problem is - I can't see these amazing growth numbers in IFT's earnings.  10 year average PE is 22 and (for what the forecasts are worth) - future PE looks even worse: 25.  I guess backwards earning CAGR (10yrs) was not too bad: 11.5, but on the other hand badly distorted by one off gains based on speculative sales), but forwards earning CAGR is negative.

Lets face it - the return of the past decade was just punters driving the share price (and with that the PE) higher and higher. Standard - self full-filling prophecy in a Group Think environment. Look at the history of any bubble, this is how it works. People don't buy anymore for the underlying value, but for the crowd which is buying as well.

The thing is - all these bubbles pop at some stage. Hard to predict exactly when, but lets face it - currently IFT's investments have a lot of headwinds. One of them might well be the needle causing the pop. 

[Basil]

I suspect that with every man and his dog into datacenters and renewable energy now, returns going forward will be just "average".  Subtract from that average, Morrison's (approx.) 2 % per annum management charge and returns could be below average.  Speaking of dog's and other interests, one thing I know for certain, you can't buy much food for your dog or diesel for your boat with a 1.88% gross dividend yield. (off Jarden's website).

[LoungeLizard]

Problem is - I can't see these amazing growth numbers in IFT's earnings.  10 year average PE is 22 and (for what the forecasts are worth) - future PE looks even worse: 25.  I guess backwards earning CAGR (10yrs) was not too bad: 11.5, but on the other hand badly distorted by one off gains based on speculative sales), but forwards earning CAGR is negative.

Lets face it - the return of the past decade was just punters driving the share price (and with that the PE) higher and higher. Standard - self full-filling prophecy in a Group Think environment. Look at the history of any bubble, this is how it works. People don't buy anymore for the underlying value, but for the crowd which is buying as well.

The thing is - all these bubbles pop at some stage. Hard to predict exactly when, but lets face it - currently IFT's investments have a lot of headwinds. One of them might well be the needle causing the pop. 

If you had got a 21% return, year on year, for the last ten years, would you be fretting over what the forward/backward PE is/was?
And isn't capital gain of any kind ultimately derived from market valuation?  To dismiss the last 10 years of spectacular growth as just "punters driving the share price" doesn't make any sense. Last time I checked that's how most of us investors make our money.
I guess you can call 10-15 years of growth a "bubble" but's it's a bit of a stretch. IFT are so well diversified and so responsive to new areas of investment, they are the antithesis of a boom and bust stock.

[LoungeLizard]

I suspect that with every man and his dog into datacenters and renewable energy now, returns going forward will be just "average".  Subtract from that average, Morrison's (approx.) 2 % per annum management charge and returns could be below average.  Speaking of dog's and other interests, one thing I know for certain, you can't buy much food for your dog or diesel for your boat with a 1.88% gross dividend yield. (off Jarden's website).

You can't measure all stocks by the same yardstick - IFT are not, and never have been, a dividend stock.

[BlackPeter]

If you had got a 21% return, year on year, for the last ten years, would you be fretting over what the forward/backward PE is/was?
And isn't capital gain of any kind ultimately derived from market valuation?  To dismiss the last 10 years of spectacular growth as just "punters driving the share price" doesn't make any sense. Last time I checked that's how most of us investors make our money.
I guess you can call 10-15 years of growth a "bubble" but's it's a bit of a stretch. IFT are so well diversified and so responsive to new areas of investment, they are the antithesis of a boom and bust stock.

Past share price performance after an ATH might be fun to brag about around the pub table, but it is for any investor for future investment decision (including - do I hold?) absolutely irrelevant. Only question would be: What is the best place to put my money today?

I doubt IFT will continue with these historic share price growth rates (this was the only thing really growing) which it only achieved by PE expansion. It well might have reached its maximum some months ago with a double peak in October - November.

Anyway - are now planning now to do a Spark on them and defend them every dollar down the trend chart? Just remember us - how did this work with Spark for you?

That's the thing with hype bubbles: what goes up needs to come down.

[winner (n)]

BP mentions rerating and loungelizaed mentions valuation gains

Then Price/Book maybe an appropriate metric

March 2016 IFT share price $3.30 and Book Value $3.42 share ....ie P/B .96

Now Book Value $8.45.

If P/B was still 0.96 share price would be $8.10

As share price $11.70 could say $3.60 is the reward for being brillant.

Book grown by 147% since 2016 ...share price by 254%

As BP says who long the rerating continue ...ie will share price match book value gains ...or might even be a rerating down

[Basil]

Great post Winner. To the best of my recollection for much of IFT's life it's traded based on book value, after all Morrison is basically a fund manager with a few very large asset positions which it regularly reviews the price thereof to generate performance fees.  Currently trading at about a 35% premium to NTA.

Dangerous business paying premiums like that for fund managed assets. Often leads to many years of sub par returns for shareholders who pay such a high premium.

[LoungeLizard]

BP mentions rerating and loungelizaed mentions valuation gains

Then Price/Book maybe an appropriate metric

March 2016 IFT share price $3.30 and Book Value $3.42 share ....ie P/B .96

Now Book Value $8.45.

If P/B was still 0.96 share price would be $8.10

As share price $11.70 could say $3.60 is the reward for being brillant.

Book grown by 147% since 2016 ...share price by 254%

As BP says who long the rerating continue ...ie will share price match book value gains ...or might even be a rerating down

I think if you did that exercise for our biggest companies, from F&P to the banks to electricity companies, you'll find the SP significantly ahead of NTA. These companies trade at a premium because of strong investor belief in the companies prospects going forward. Occasionally there's a re-rating up or down but long term investors are not bothered by that. That said, I wouldn't be totally passive regarding IFT - I cash up a few shares when the SP surges, buy in again on the dips. Has worked for ten years and I don't see any reason to change at this stage.

[LoungeLizard]

Great post Winner. To the best of my recollection for much of IFT's life it's traded based on book value, after all Morrison is basically a fund manager with a few very large asset positions which it regularly reviews the price thereof to generate performance fees.  Currently trading at about a 35% premium to NTA.

Dangerous business paying premiums like that for fund managed assets. Often leads to many years of sub par returns for shareholders who pay such a high premium.

Again - 21% total shareholder returns for the last ten years. Fixation on dividends means you have missed out on what has been probably the strongest and longest run of any NZ company.

[LoungeLizard]

Past share price performance after an ATH might be fun to brag about around the pub table, but it is for any investor for future investment decision (including - do I hold?) absolutely irrelevant. Only question would be: What is the best place to put my money today?

I doubt IFT will continue with these historic share price growth rates (this was the only thing really growing) which it only achieved by PE expansion. It well might have reached its maximum some months ago with a double peak in October - November.

Anyway - are now planning now to do a Spark on them and defend them every dollar down the trend chart? Just remember us - how did this work with Spark for you?

That's the thing with hype bubbles: what goes up needs to come down.

You change with the wind. You say that trying to predict the future is a waste of time, now past performance can't be used either. What's left - flip a coin?
And no - I'm not "defending" IFT or Spark for that matter. Just stating why I continue to hold a stake in each - for entirely different reasons of course.

[Basil]

Again - 21% total shareholder returns for the last ten years. Fixation on dividends means you have missed out on what has been probably the strongest and longest run of any NZ company.

More than 20% compounded for 10 years results in tremendous gains over a decade, ask me how I know lol.  I haven't missed anything and have achieved similar results in a different and lower risk way with shares spread and diversified over a much wider range of assets.  I get it why people are happy with IFT's long term performance, I really do but I still believe they are a quasi-fund manager that deserves to be trading close to asset backing.