Quick bite: Infratil on concentration risk & AI

In this quick bite Jason Boyes from Infratil talks to some tough questions—share price drops, DeepSeek and CDC’s weight in the portfolio. Plus, hear about the importance of clear comms and site visits, and why he's staying patient on AI—even if investors want their Christmas presents early.

This quick bite is from our previous episode 'How much runway does Infratil have?'

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Episode Transcript

Speaker 1 (00:00):
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Speaker 2 (00:11):
A good old share price every CEO's dread when somebody
asks them, it's fair to say that it had a
bit of a beating when you did release your consolidated earnings.
I think it was down nearly six percent on the day.
I think it's recovered somewhat since. If we do look
at that, though, the shareholder return is minus two point

(00:32):
six percent, I think is what I saw. I think
it was in the annual report that.

Speaker 3 (00:38):
Was the twelve months to thirty or March.

Speaker 2 (00:39):
Yeah, Now that does seem to be a discount, and
you do talk about this in their new report. Between
the share price and the asset values. What can be
done about that.

Speaker 3 (00:53):
Discount?

Speaker 4 (00:53):
And there is an interesting topic. I'd talk to at
least a third of people I'd talk to, So there's
no discount. It's always rome, which there's some truth to
that rome. And there's definitely a difference between the value
for one share today versus a majority or the whole
business in five years time.

Speaker 3 (01:11):
Really the listed price is the price.

Speaker 4 (01:13):
Today for any given volume of shares, right, So it's
not really the long term value of the assets, and
it's the difference between that long term value and the
current value that.

Speaker 3 (01:22):
People talk about the discount.

Speaker 4 (01:24):
For us, it's really a signal for us to think about,
is there something about our business that's not understood well
and should we therefore be issuing some communications or bringing
people into cur assets so that we can take that
stuff off the table and over. I think the start
of this year there was a lot of worries about

(01:45):
AI and deep seeking implications for CDC, which we thought
was what was going on with a number of share
prices in our sector at the time, and so through
April we had a number of we hare to site
visit to our big development of Melbourne for CDC and
a few other communications with the team to try and
make sure people understood how CITYC was placed.

Speaker 3 (02:06):
And actually that's you saw.

Speaker 4 (02:08):
Actually I think the market react quite nicely did that
and the sharp post kind of move up. So really
it is for us it's where we should focus our communications.
Intention is where we first go to. Obviously, every day,
like any normal human, you re examine every decision you
made the day before, so you do a bit of
that as well, but mostly it's for communications.

Speaker 2 (02:26):
Say the well, CDC, it is now forty percent of
the portfolio. Is it a concentration risk?

Speaker 4 (02:34):
It is a big part of the portfolio. We've had
assets that have been a bigger proportion in the past.
So TrustPower is over fifty percent for a lot of
the early history of fort till I would say it's
about as big as you'd want it to be. If
you stood back over a long term period of time
we talked about the results.

Speaker 3 (02:53):
We try and manage the stuff.

Speaker 4 (02:55):
Over the medium term rather than really reacting really quickly
to these things. And what we do see is other
opportunities within the business growing, having the potential to grow
quite quickly I think over the next two or three years,
which should balance CDC's weight in the portfolio, if you like.
But if I stand back, you know, having a big

(03:17):
proportion of your portfolio and literally the most exciting investment
sector in the world at the moment.

Speaker 3 (03:24):
Is actually a pretty good place to be.

Speaker 4 (03:26):
And you know, you just have to ask yourself is
there going to be more or less AI tomorrow? And
you kind of know the answer, right and so I
think being right there in a business which, as I
said before, is incredibly well placed to just pick up
these contracts as and when they come, I'd still do
it every day of the week.

Speaker 2 (03:44):
But I is volatile and risky and rapidly changing, as
you know, So there are surely there are risks there,
but it's what you're prepared to trade off.

Speaker 4 (03:56):
Yeah, I think the risk is more timing, and even
then the risk is not very high, and that we
know where capacity is at with our clients. We know
that demand is growing incredibly strongly. Therefore there will be contracts,
and so really the question for us is we're doing
my weather contracts today, end of the year, early next year. No,

(04:17):
if you put that in a thirty year valuation model,
that moves the valuation literally not at all. So as
long as you fundamentally believe AI is going to be
a thing and that CDC will pick up more than
its fair share, then we're on an incredibly great spot.

Speaker 3 (04:32):
You know, I would be patient personally,