HMC Capital (HMC) $2.95

HMC +17.06% rallied strongly after announcing a major operational restructure, as management moved to simplify the business, sharpen its focus and improve returns. The group, led by David Di Pilla, has been under pressure across several fronts, including the underperformance of its HMC Capital Partners Fund, a weaker share price, and challenges within DigiCo Infrastructure, its listed data centre vehicle. While the restructure is not a silver bullet, it is a clear attempt to clean up the portfolio and refocus HMC around areas where it believes it has the strongest competitive advantage.

Main points:

• HMC Capital Partners Fund to close: investors will receive a mix of cash and distributions of listed holdings, including stakes in Baby Bunting, Ingenia Communities and Lendlease.
• Private credit to grow: HMC is negotiating to secure more than $1bn from institutional investors to lend against commercial real estate.
• Private credit portfolio size: expected to grow from $2.2bn in 1H26 to more than $3bn once deployed.
• DigiCo asset sale: DigiCo Infrastructure is selling its Chicago data centre for $US750m / ~$1.04bn, around a 5% premium to its 2024 purchase price.
• DigiCo strategy shift: the group is also expected to sell two Los Angeles sites after approval delays and redirect capital into expanding its SYD1 Sydney data centre.

DGT shares were also on the up, rallying ~23%. HMC owns 20% of DGT.

The decision to close the HMC Capital Partners Fund is an admission that the strategy had become too complex and too hard to scale. The fund was initially successful, helped by its Sigma Healthcare position and the subsequent Chemist Warehouse merger, but it had underperformed its benchmark in recent years. While HMC described the fund as private equity, in reality it was concentrated in a handful of listed companies, which made it harder to justify as a scalable institutional product.

The broader HMC platform also became too complex. They pitch themselves as a specialist asset manager capable of building platforms around real assets and structural megatrends, but that’s a very broad church, and execution let them down. HMC is now trying to narrow the focus to areas where it can generate more reliable fee income and better returns on capital.

The private credit pivot is the most important part of the update. HMC is looking to materially increase its exposure to commercial real estate lending, with more than $1bn of potential institutional commitments.

DigiCo is also being reshaped. Selling the Chicago data centre at a 5% premium is a positive, particularly given the broader pressure on the vehicle since listing. The sale helps simplify the portfolio and frees up capital for higher-conviction opportunities, including the expansion of SYD1 in Sydney.

We’ve worn a fair amount of pain on our HMC holding in the Emerging Companies Portfolio; however, todays update gives us conviction that the tide is now on the turn. HMC will be a better business in 12-months’ time than it is today, we think.