HMC Capital unveils energy, digital and investment arms as it targets new growth

Created to buy the dumped Masters hardware sites from Woolworths, HMC Capital is now targeting $20bn funds under management and has revealed its next stage of growth.

HMC Capital boss David Di Pilla. Picture: Jane Dempster/The Australian

Former banker David Di Pilla is setting a frenetic pace fashioning a new global financial empire, unveiling a move into renewable energy assets as well as buying a digital infrastructure investor in Greenwich, Connecticut.

But he remains acutely aware of the pitfalls of empire building and looks to US giant Blackstone or Macquarie Bank rather than the failed Babcock & Brown.

With $10bn in funds under management his ASX-listed HMC Capital – with a bulging investment portfolio stretching from hospitals to telco towers – is now setting its sights on $20bn, and is fleshing out new plays in energy transition and corporate activism, and says he won’t follow the mistakes of others by loading up on debt and hubris.

“I’ve been around a long time and I have watched great companies being built, I’ve also watched carefully other companies fall by the wayside,” Mr Di Pilla told The Australian after HMC Capital announced a 40 per cent lift in statutory revenue to $40.22m, a 40 per cent rise in interim net profit to $35.23m and a string of new growth platforms.

“We have identified three groups we admire, four key points those groups have and one of the most important is elite talent and so we think we have got great people. I listen to those great people around me, and we manage risk really, really carefully.

“But I would say probably the most important thing is to always make sure at every point of the journey you are checking your risk and the amount of debt you have on the balance sheet.

“So have a look at the HMC group today and despite the growth, despite the achievements and despite where we are at, we have zero debt on the balance sheet and undrawn lines of $1.2bn in liquidity.”

Mr Di Pilla has previously said he hoped to create from HMC Capital a “mini Blackstone” – referring to the world’s largest alternative asset manager, with $US1 trillion in assets under management – but is keenly aware of empires built by local Babcock & Brown which also bought up assets across the globe to ultimately crash and burn in the global financial crisis two decades ago.

Having witnessed the carnage of the GFC, Mr Di Pilla knows Babcock & Brown’s implosion was fuelled by massive debt and plenty of hubris.

HMC Capital boss David Di Pilla and new hire Angela Karl.

Reporting its interim results on Tuesday, Mr Di Pilla revealed the next stage of the company’s growth that has seen it radically transform already since it was created to scoop up empty Masters hardware stores dumped by Woolworths almost 10 years ago.

HMC Capital has now targeted to double its funds under management to $20bn, established a new energy transition investment arm to be run by new hire and former QIC executive Angela Karl and created a corporate activism and advisory arm to be run by veteran financial operator Robert Vanderzeil.

It has also announced the $US28.5m purchase of a North American digital infrastructure development platform called StratCap, based in the US financial and investment hub of Greenwich, which owns and manages a large portfolio of digital assets such as data centres and transmission towers.

For the half its funds under management increased by 37 per cent to $8.5bn, and it has more than $10bn in funds when including development pipeline and new growth initiatives. Total sales – which excludes the impact of its stakes in its two listed property trusts – rose 85 per cent to $90m, and it ended the half with a net cash balance sheet with $1.2bn liquidity including liquid assets and debt capacity.

The company declared a flat interim dividend of 6c a share, payable on April 2. Mr Di Pilla said HMC Capital should be viewed as a growth stock and that it had adopted the distribution policy of keeping its dividends at 6c every half.

Investors warmed to HMC Capital’s growth agenda, sending HMC Capital shares up more than 10 per cent to a record high of $6.93.

“HMC today announced a new divisional structure which reflects our continued evolution into a much more diversified business following the establishment of three major new platforms in energy transition, capital solutions and digital infrastructure,” said Mr Di Pilla.

These new initiatives include establishing a new energy transition platform to capitalise on what it calls “the investment opportunity of a generation” − establishing a highly credentialed investment team, which will be led by Ms Karl. Representing an addressable market of $US275 trillion, HMC Capital’s new energy transition division activities will span renewable and clean energy, decarbonisation of production processes, critical minerals infrastructure, electrification and carbon offset/capture technologies.

In digital infrastructure, with an addressable market of more than $US1 trillion, HMC Capital has bought StratCap from its US partners as it looks at a $1bn development pipeline which has targets that could take it to a pipeline of $5bn.

HMC Capital, whose satellite investment fund late last year led the merger of the privately owned Chemist Warehouse with the ASX-listed Sigma Healthcare, also has in development a global healthcare division and a private credit pillar, the company said.

Mr Di Pilla said the investment and activist group his team was building at HMC Capital meant the Chemist Warehouse deal was “highly repeatable”. He also revealed HMC Capital has been building up a stake in an ASX-listed company, but he declined to comment further.

HMC Capital is forecasting pre-tax operating earnings per share of no less than 33c per share, including investment gains and performance fees, and reaffirmed dividend per share guidance of 12c for the full year.