Investment view
HMC Capital Limited (HMC, the Group, ASX: HMC) is a diversified, large-scale alternative asset manager that leverages its specialist capabilities to execute on complex transactions focused on high conviction trends within sectors incorporating healthcare, decarbonisation, digitisation and deglobalisation. The Group applies its balance sheet to seize high ROE opportunities aimed at growing Assets Under Management through asset warehousing, underwriting, and M & A activity. HMC has established unlisted funds, two listed REITs and newly developed funds focused on energy transition and digital infrastructure.
Digital Infrastructure Asset Management Platform
The acquisition of North American Digital Infrastructure Asset Manager development platform, known as StratCap LLC for US$28.5 million in March 2024, represents a key milestone in HMC’s digital infrastructure Asset Management ambition. StratCap LLC is a scalable platform operating in North America with a deep origination capability and transaction pipeline.
On 4 October, in response to media speculation, HMC confirmed that it has commenced due diligence to potentially acquire various data centre assets. Discussions between HMC and the relevant vendors are ongoing, and the terms of the potential acquisitions are confidential. However, HMC confirmed that the data centre assets include Global Switch Australia’s business. Media reports have speculated that the purchase price for Global Switch Australia is about $2 billion.
Global Switch operates 13 facilities across Europe, Australia, and Asia and has other facilities under development in London and Frankfurt. Several major global investment funds have been named as potential buyers of Global Switch for $6 – 7 billion. It has been reported an investor syndicate that includes the Queensland Investment Corporation, and the Canada Pension Plan Investment Board had made a bid for the Australian business of Global Switch. However, the bid did not meet the valuation set by Global Switch Australia.
Now that Global Switch is majority owned by Chinese interests including Jiangsu Shagang Group Co and Avic Trust Co., several Australian governmental departments have left Global Switch’s Sydney sites. These include the Department of Home Affairs, the Australian Securities and Investments Commission, the Australian Digital Health Agency, and the Australian Communications Media Authority. The purchase of Global Switch’s Australian-based data centres for around $2 billion would be an ideal seed investment for HMC’s Digital Infrastructure Asset Management platform. I
Primed for growth
A key element of HMC’s evolution is to build a large-scale, diversified global funds management platform with Assets Under Management (AUM) beyond $20 billion over the next few years. Current AUM is $12.7 billion and was $9.7 million at 30 June 2023.
HMC’s earnings growth trajectory is supported by five highly scalable and growing platforms. These are Digital Infrastructure, Energy Transition, Private Equity, Private Credit and Real Estate.
The Group is well capitalised to achieve this growth strategy with no core debt, $0.5 billion in cash and $0.7 billion in undrawn debt capacity at 30 June 2024.
FY25 dividend guidance is 12 cents per share and no EPS guidance has been provided, however the half-year results announcement in February 2025 should provide specific details around the timing and amount of capital to be deployed across the platform. This detail should enable the amount of management and performance fees to be estimated for FY25 and into FY26.
Deal flow will drive earnings growth from recurring management fees, performance fees and trading profits on asset realisation. Group operating margins should expand as the platforms build scale toward the $20 billion AUM target and this asset growth should support rising annual dividends over the long term.
