DigiCo’s data centre dream is fading as investors dump stock

DigiCo was to be a flagship float for David Di Pilla’s HMC Capital but has failed to win investor support. Picture: John Feder

The data centre float that sent David Di Pilla’s HMC Capital empire into a tailspin when it flopped last December is showing few signs of recovery with investors dumping its shares after an uncertain maiden result.

The funds manager’s ambitious launch of the DigiCo Infrastructure REIT came as the hype around data centres peaked but it has since cooled as some major users pull back from leasing and China’s DeepSeek sent a shockwave through markets

The trust, which raised funds at $5, took a hit on Monday as its shares dropped to a low of $2.74 – a drop of 14 per cent – before settling around $2.77 in afternoon trade.

Despite HMC’s much vaunted deal making prowess it has been unable to arrest the slide in DigiCo as investors have dumped the stock.

HMC had tapped Chris Maher as chief executive as it looks to win back market support after the slump. Former CEO Damon Reid will become chief operating officer to focus on running the local portfolio, where the company is expanding its main data centre in Ultimo.

The trust is banking on this Sydney data centre, known as SYD1, which was granted ‘Certified Strategic’ data centre status under the Australian Government Hosting Certification Framework getting new work.

While DigiCo now assembled a national footprint of HCF-certified sites across both NSW and Queensland and a project underway at SYD1 will see 9MW of liquid cooled capacity delivered in the fourth quarter, investors wanted more certain earnings guidance for this financial year.

The trust reported fiscal 2025 annualised underlying EBITDA of $99m, which it said was ahead of prospectus guidance and a fiscal 2025 distribution per security of 10.9c in line with guidance. It said it was well positioned as it had $740m of available liquidity, giving it the firepower to keep rolling out the data centres.

HMC believes in Australia it is well positioned to lock in demand for data centre capacity and DigiCo is targeting to have Contracted IT Capacity of 27MW by June 2026 – a huge 30 per cent growth from June this year. The trust’s US business is also set to benefit from a contracted rental ramp up, which is expected to generate incremental $40m of EBITDA in fiscal 2026.

But investors in the usually more certain world of real estate investment trusts were rattled by the lack of a specific forecast.

DigiCo said fiscal EBITDA growth will ultimately depend on the timing of new contract commencements, renewals and remixing of existing capacity in the Australian business. Distributions in fiscal 2026 are expected to be 90–100 per cent payout of Funds From Operations.

The DigiCo REIT flop ha shown little signs of recovery. Picture: Jane Dempster

Growth capex in fiscal 2026 expected to be in the range of $100 –$120m primarily driven by the Sydney expansion and the trust indicated it was keen to bring capital backers into the site.

E&P analyst Paul Mason said DigiCo’s results were a slight miss but not far off expectations, and overall in line with prospectus forecasts. But he said they were complicated by the company’s guidance approach which has decided not to provide an actual range. “Given comparable companies all have no issues providing a range, we expect the stock will see some pressure,” he said.

The data centre business locally was affected by the Australian Defence Force shifting out of the Sydney facility. Mr Mason said the lack of a firm guidance range for the local business probably made a number of things awkward overall. However, SYD1 is now able to sell to the government right away, which is probably faster and better than expected.

“The market didn’t like the tone and definitely didn’t like the approach to disclosure around the Australian business. We would guess that the stock will remain under pressure until the company can deliver a positive catalyst from here,” Mr Mason said.

Analysts believe that more customers have shifted out of the Australian complex. But the company said that its modified expansion program would be able to handle larger deployments and it had interest from government customers looking to return to the site since it won HCF status.

DigiCo expects a planned centre in Los Angeles could get council approval by the end of the year, and construction starting next year.

The trust announced its fiscal 2025 result with FFO per share of 8.8c which below market consensus at an estimated 7 per cent miss, with Bell Potter noting it had not provided guidance for this financial year.

Bell Potter analyst Andy MacFarlane said DigiCo’s maiden result was always likely to be “messy’” as no guidance was established at IPO for earnings. “The outlook for fiscal 2026 could have some book-ended outcomes given the timing to secure tenants and contracted capacity against the timing of billing as well as any further churn for SYD1 or iSeek assets,” he wrote.