The Times asks if it’s worth investing in Edinburgh IT right now; while The Telegraph puts its hands up and admits it backed the wrong horse in the digital infrastructure sector but, luckily, the tipster believes it’s not too late to back the other horse – Cordiant Digital Infrastructure.

By Frank Buhagiar

Tempus – Is it worth investing in Edinburgh Investment Trust right now?
Founded in 1889, Edinburgh Investment Trust (EDIN) has seen a lot: world wars, depressions, financial crises, and, most recently, a global pandemic. And yet, despite the challenges faced, the UK equity fund has built up an impressive track record. For example, over the last five years, a period that covers the pandemic, the fund has generated a +60% total return, easily beating the FTSE 100’s +35%, the FTSE all-share’s +33%, and the FTSE 250’s +18%. EDIN trumps the FTSE all-share in terms of yield too, at 3.8% compared to the index’s 3.6%, although this is short of the 4.1% peer average.
Strong track record then, but not one that comes with a hefty price tag. In fact, fees have been coming down. A new annual management fee structure came into effect in April: 0.45% on the first £500m market capitalisation; 0.4% on the next £500m; 0.35% thereafter. Based on the trust’s market cap as of the end of last year, the restructuring is expected to result in an 11% reduction in the pro forma management fee. As a well-known supermarket tells us, “Every Little Helps”.
And yet, the trust’s shares trade at a 10% discount to net assets even with a share buyback programme in place. Tempus thinks this “looks far too wide given the strength of the portfolio and its robust record. A re-rating is unlikely to appear quickly, but a quality, longstanding name such as the Edinburgh Investment Trust should stand to gain.”
Questor: We backed the wrong digital horse – here’s how to fix it
Two years ago, The Telegraph’s Questor tipped Digital 9 Infrastructure (DGI9) as its preferred means of gaining exposure to the “plumbing of the internet”, the transmission towers and cable providers that are the enablers of the internet. This was on the back of surging use of the internet following the pandemic. Two years on and, weighed down by a litany of setbacks including soaring interest rates, expensive debts, capital spending, the loss of the original fund managers, and the scrapping of the dividend, it’s fair to say DGI9 has failed to deliver. “The brutal fact is we backed the wrong horse at the wrong time.” All is not lost, however. For the tipster sees a chance for redemption – in the form of the other horse in the race, Cordiant Digital Infrastructure (CORD).
Questor believes “Cordiant is everything its beleaguered competitor is not.” Managed by Steven Marshall, a former boss of telecoms and broadcast giant American Tower, the fund “wisely invested the £795m raised from investors in its first year.” This enabled CORD to avoid paying “racy” prices of up to 25 times the earnings that digital platforms were later going for in mainland Europe. Instead, a portfolio of five cash-generative businesses was acquired at an average of 10.2 times earnings. These include CRA, a Czech group that owns towers, broadcast networks, and data centers; and Emitel, a Polish operator of radio broadcast services, mobile towers, and an internet TV platform. And the portfolio is performing – CORD posted an underlying +10.6% return for the year to 31 March, ahead of the 9% annual target.
The strong showing has continued in the current year with revenues and profits growing 8.9% and 14.2% respectively in the first quarter. The fund is therefore on course to meet the raised dividend target of 4.2p, a level that puts the shares on a 5.2% yield. Questor points out, “Unlike DGI9, Cordiant is not in a financial straitjacket.” CORD has access to £335.4m of cash and borrowings, while 70% of its debt is fixed with the first repayment not due until 2029.
And crucially, Questor is not now backing the right horse after the horse has bolted. The shares are currently trading at a 32% discount to the latest net asset value and at a 19% discount to the fund’s launch price. Questor puts the bargain prices down to DGI9’s woes and high interest rates but believes investors should follow the lead of Marshall, a regular buyer of CORD shares. As Questor writes, “With the boom in artificial intelligence increasing demand for data, Cordiant is in the right place with a sensible portfolio to take advantage.” In short, investors may well have another bite of the cherry.
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