Honda Motor Co., Ltd. Price & Performance (HMC)

Good morning, and thank you for joining today's call. Before we commence, HMC would like to acknowledge the traditional custodians of country throughout Australia and celebrate their diverse culture and connection to land, [indiscernible] community. We pay our respects to their elders past and present and extend that respect to all Aboriginal and Torres Strait Islander people today. With me on the call this morning [indiscernible] Angela Karl, Managing Director and Head of RNG Transition Platform, Chris Ma, Executive Director, Digital Infrastructure. I've asked Angela and Chris to join us for today's presentation. They are leaders of two of our newest and most significant growth verticals which they will speak to this morning. I'll start this morning's presentation on Slide five, for an overview of our first half twenty twenty five results. [indiscernible] The six month period to thirty one December twenty twenty five was highlighted by exceptional deal generation and value creation for the HMC Group. Which included financial close of the Patent Credit acquisition on the 07/01/2024 Securing our entry into the product credit space, underwriting an ASX listing of Digico Infrastructure REIT Australia's largest IPO in six years. To underpin our digital infrastructure ambitions. Our private equity team, we're pleased to see the landmark Sigma Chemist Warehouse merger received ACCC approval in November to continue their market leading performance And in December, we announced the acquisition of the renewable energy platform [indiscernible] [indiscernible] On highly attractive terms which is a key seed asset for our energy transition platform.

As a result of this activity, we were able to deliver record AUM and operating earnings growth for the period. The key financial highlights on the page included Our funds under management grew during the half by 45% eighteen point five billion Total revenue of $272,300,000 was up by 203% pleasingly this growth in revenue came from high quality and importantly recurring funds management income which grew by a similar 209% year on year to 126,500,000.0 Our business is now well capitalized with increasing at calendar year end to $1,900,000,000 And finally, pre tax operating earnings of $0.519 per share were up from $0.171 in the first half of financial year 2024. And this continues the strong growth trajectory in operating earnings since our listing in 2019. Most importantly, We now move into financial year 2025 with a much stronger recurring earnings base underpinned by funds management and investment income. We estimate this annualized operating EPS base to be $0.45 to $0.5 per share. Combined with our track record of being able to identify and execute execute large complex transactions we are confident in our ability to maintain our earnings growth momentum into the future. We are very proud of the significant progress HMC is making to towards its objective to become Australia's leading alternative asset manager.

The HMC team is building what we call a forever company. A company which has retained many law shareholders from day one while also building a broader institutional investor base we keep delivering on our sustainable growth objectives. None of our achievements would be possible without great people. Our organization is built on a culture of ambition, accountability and high performance. I'm pleased to note that during the just over five year period as an ASX listed company, we have retained great stability across our executive leadership team. With minimal turnover. And as we grow, our ability to track quality new talent continues to improve. You can probably appreciate therefore why the leadership team at HMC and I are so motivated and excited by the future. We're also today announcing our inaugural Investor Day for the group on the April 3. The day will be a great opportunity for our divisional business leaders to showcase the group's exciting growth prospects. I now would like you to move to Slide six of the presentation. Our economic flywheel. The flywheel is now much broader and deeper it was when we first revealed it two years ago. HMC today has multiple growth drivers a more diversified platform.

As our balance sheet expands, so does our ability to proactively use it to accelerate our AUM growth. Examples of this in the first half of twenty twenty five where we utilized our balance [indiscernible] The establishment of the $4,000,000,000 Digico infrastructure rate where HMC used its balance sheet to assemble and underwrite the seed portfolio assets ahead of the IPO. Digico is now the only ASX listed owner operator and developer of data centers in both Australia and The United States. Another example during the period included the $950,000,000 acquisition of NeoWinds Victorian renewable portfolio. On deferred settlement terms to further seed HMC's energy transition platform. Importantly, the ability to provide the vendor with execution certainty enabled us to secure such an attractive opportunity. The scalability and success of our business model is demonstrated on the right hand side of this slide. Since our IPO in 2019, HMC has grown AUM by 84% per annum. Whilst consistently growing operating EPS improving the quality of our recurring income, while maintaining a strong balance sheet with high levels of liquidity. We remain confident in driving our performance toward our stated 20% ROA target. I'll now move to Slide seven where I'll discuss third party capital raising across our platform.

With all five business verticals now well established, we are seeing a significant increase in the momentum of third party capital raising across institutional and wholesale sources. In real estate, we've worked tirelessly over eight years now establish ourselves as a market leading manager and this is now being noticed rewarded by institutional capital. We are now well advanced on the following three new third party institutional capital funds and mandates. Which could total over £2,500,000,000 of potential deployment over the next twelve to twenty four months. These include a new last mile logistics vintage which has been launched by a mandate of up That's up to $1,000,000,000 with a global multi manager a new $1,000,000,000 greenfield [indiscernible] where our cornerstone investor is now IC approved, And we have two other investors in the final stages of IC approval over the coming months. And three, we are well progressed on establishing a new $1,500,000,000 urban retail fund alongside one of the world's largest pension funds. [indiscernible] This strong growth has only been achieved due to the fact that our team led by Sid Sharma has continued to establish itself as the leading Australian daily leads last mile logistics, retail, real estate funds management platform.

In energy transition, we are well progressed on our inaugural [indiscernible] with multiple institutional investors now in advanced due diligence. With our target to reach first close for our $2,000,000,000 target fundraising before the end of financial year 2025.

We've appointed Global Placement Agent, Campbell Lutchins to commence marketing the platform globally in the second half of calendar year '25. We've got great confidence in this platform raising as we've secured the seed NeoN portfolio on attractive terms and have an experienced management team bringing decades of successful track record to the table. In digital infrastructure, having established our Digico infrastructure REIT, we now have a unique [indiscernible] developer and manager model across Australia and The U. S. We're engaging with multiple institutional investors regarding our U. S. Owner developer model.

In addition, we are the external advisor to a public traded REIT. That intends to continue to acquire digital infrastructure assets in The United States Of America. The institutional and wholesale fundraising initiatives we have underway may partner with Digico REIT in the future. To provide a more diversified lower cost of capital over time. And in private equity, we are working with strategic and institutional capital to originate private equity transactions across platform. Some of you may have noticed last week's media speculation around our in the Healthscope portfolio. Which I will have more to say later in the presentation. [indiscernible] In addition, we're continuing to build our wholesale team to be able to more broadly market and distribute our HMCCP fund across financial advisor channels.

And finally, in private credit, we continue to work on a new $300,000,000 to $500,000,000 HMC capital diversified credit fund. Either via listed lit or wholesale capital product. As a complementary funding source to the existing $500,000,000 fund financing we've already secured from Goldman Sachs and UBS. Moving now to Slide eight to discuss our fundraising distribution team. As I mentioned earlier, At the core of HMC Capital is a culture of ambition, accountability and high performance. To continue driving growth in AUM, accelerating the flywheel, we've assembled a market leading team of fundraising and distribution professionals who demonstrate these qualities. We've made significant investment into this area of our business over the last six months and we continue to invest in the strategically important area as we prepare for the next stage of growth across the institutional and wholesale capital platforms. Our institutional fundraising team is now led by added back who joins after a long career Macquarie Asset Management, who joins after a long career with Macquarie Asset Management. He's also a senior adviser, who joins after a long career with Macquarie Asset Management. [indiscernible] Who recently joined us after a long career at Lendlease.

Nick Harris, who founded our institutional fundraising platform remains in his role as Chairman. Our Australian wholesale team is led by Tim Koroknei and he is supported by by Craig Schlossle. Through his success as Co Head of Patent Capital has built a strong and successful wholesale fundraising capability. And finally, through our U. S. Business strat cap, we have the ability to raise wholesale and retail capital in The U. S. Market.

Our efforts here will initially be focused on our digital infrastructure business. These individuals have been tasked with showcasing HMC's market leading performance to date and harnessing new capital to drive AUM towards $50,000,000,000 over the next three to five years. Moving now to Slide 10 to discuss our investment strategy. HMC's investment philosophy is built around four high conviction megatrends we identified several years ago. These trends remain unchanged. Continue to provide a high level of focus the long term growth prospects of our underlying investments and portfolio companies. Importantly, this investment philosophy is consistent with our belief that businesses exposed to structural growth are well positioned to withstand market events which occur from time to time. These are also the businesses best positioned to deliver. Long term sustainable returns. It's probably a good time [indiscernible] [indiscernible] And reflect on HMC a manager of capital and our philosophy as an organization. We have great conviction in our business we take a long term view in investing capital [indiscernible] areas supported by these megatrends. It's also opportune to touch on the ASX trading debut of Digico Infrastructure Group. We're disappointed that Digico REIT trading below its $5 per IPO price.

However, has our conviction in the underlying digital megatrend diminished? Absolutely not. We are here to allocate and invest capital for sustainable [indiscernible] [indiscernible] Patient long term investors in Digico will be rewarded. This equally applies in the healthcare space.

Where HCW is dealing with structural changes in the private healthcare sector. We believe once our tenant health scope is able to address sector funding pressure, and its capital structure, the infrastructure like characteristics of our assets will prevail in the long term. For investors. I'll now move to Slide 11 where we'll discuss our divisional performance.

I'll begin on Slide 11 discussing our real estate platform. [indiscernible] Real estate is HMC's largest business today with approximately $10,000,000,000 across listed and unlisted funds. Since December 2020, HMC has been able to grow real estate AUM at 77% compound annual growth rate. Despite navigating through one of the most challenging interest rate hiking cycles in history. In the first half of financial year 2025, real estate generated over $55,000,000 of high quality recurring funds management revenue. Divisional ROIC has improved materially over the past six months we expect to continue trending toward our 20% target over the medium term. The operational performance across our real estate platform has remained This reflects the structural growth in our target sectors and our hyper performing operational teams. I'm also pleased to update you today that the $1,000,000,000 last mile logistics fund is also now fully deployed following the acquisition of Roseland's And Carlingford assets.

As I mentioned earlier, HMC has also established two new to retail fund strategies in early twenty five These include a $1,000,000,000 HMC capital unlisted Greenfield Fund focused on development opportunities of neighborhood centers in high growth corridors. Four seed assets have been secured, with 40% of the equity IC approved and committed, and the remainder expected in the coming months.

And $1,000,000,000 has been allocated to our HMC Capital Australian retail opportunities HARP as we call it. Which is effectively the next vintage of our LML strategy.

An initial approximately $100,000,000 equity investment has been secured from a global multi manager as part of the acquisition of Plumpton marketplace. We're also well advanced with capital raising on a new $1,000,000,000 to $1,500,000,000 HMC capital unlistened [indiscernible] HEARTH as we call it. We expect this fund to be launched in the second half of financial year twenty twenty five with a strategy of acquiring large scale subregional and regional retail assets. We look forward to updating you on this strategy in the coming months. Looking ahead, we are significantly more optimistic about the growth outlook for our real estate business as we move forward in a more favorable interest rate cycle.

Moving now to Slide 12 to discuss our private equity vertical.

Our private equity vertical, which was established just over two years ago, continues to be a major contributor to financial [indiscernible] With $114,000,000 of divisional revenue and investment income. Since inception, the fund has generated a 38.4% annualized return to the January '25.

That's 25.7% above the ASX three hundred accumulation index. The fund HMCCP, Fund one was also ranked as the top performing Australian equities fund in calendar year 2024 by Morningstar.

Delivering over 55% net returns during the year. This is a great endorsement of the strategy and investment process. Pleasingly, the fund is at a strong start to to the second half of financial year 2025 without performance being driven by positive trading updates from portfolio companies including Sigma, Ingenia, and Baby Bunting. We continue to see significant upside in each of the fund's existing investments and are currently screening for new opportunities. In order to further strengthen the investment resources in our HMC capital Michelle Moll has moved into a Director role focused on real estate investment opportunities in that portfolio. HMC is today also updating the market around our plan to establish a traditional private equity strategy. At this stage, our thinking is that this strategy is to be more transactionally focused. We will raise fund We'll raise capital from [indiscernible] and retail sources around specific situations. We believe the circumstances around Healthscope present an opportunity to investigate establishing an HMC sponsored consortium bid to acquire and recapitalize the business. The consortium which is in the early stages of being assembled today includes key stakeholders from landlords, private institutional capital and experienced management team private hospital operators and a group of leading financial and strategic advisors.

Importantly, we are looking for a solution that seeks to maintain the Hellscope operating platform avoids or minimizes hospital closures and maintains jobs.

Importantly, in line with group policy, HMC has established information barriers between the private equity and real estate divisions to manage any potential conflicts of interest. Moving now our private credit platform, on Slide 13.

Our July 2024 has now been fully integrated. And is experiencing strong momentum with capital inflows and deployments driving 14% AUM growth during the first six months of financial year '25.

Or equivalent of approximately 30% As at thirty one December twenty four, we managed over $1,800,000,000 in private credit investments across commercial real estate corporate and asset based finance. Looking ahead, our commercial real estate deal pipeline has grown to over $3,000,000,000 reflecting both increased activity and a growing [indiscernible] deal size. We continue to invest in both fundraising and origination capabilities including opening two new offices on the Gold Coast and Perth, in the first half of financial year 2025 and making multiple senior origination appointments Written asset based finance. We've onboarded a high caliber team. Led by Adam Roberts Thompson and Dame Weiss both seasoned private credit executives. We've already completed our first $100,000,000 corporate lending transaction in December and have identified a promising deal pipeline of opportunities. These achievements demonstrate the progress we're making in building a leading and diverse private credit platform. We're confident in our team our strategy and the significant growth opportunities that lie ahead. Now move to Slide 14 to discuss our focus on credit quality. Following the acquisition of Paton, we remained highly disciplined in our approach to new lending deployment, And New Dealer Right origination. Our focus remains on core middle market residential real estate, and we maintain a cautious stance on under pressure real estate sectors such as office.

Our loan book remains in a strong position with 92% senior secured loans and an average LVR of just 68%. Our focus on credit risk management has been demonstrated through the implementation of strengthened risk and governance controls and investment into the capability of our team. Pleasingly, the private credit market in Australia continues to grow meaning we can maintain these strong credit fundamentals while still achieving growth in IUM. [indiscernible] We believe our investors are also well placed moving forward. With rigorous credit assessment in place for new loans and for pre acquisition loans, we have specific indemnities in place and standard I'd now like to hand over to Angela Karl, to discuss our energy transition platform on Page 15. Thanks, David.

Our move into the energy transition sector reflects a significant level of investment required both in Australia and globally to achieve both decarbonization targets as well as growing energy demand from the digitalization megatrend. Solid progress was made during the first half of financial year twenty twenty five. With HMC securing a majority ownership position in leading battery developer and owner, STORE Energy, in July, followed by the successful acquisition of Neewen's Victorian portfolio, announced in December. In the Newland Victoria acquisition, we have secured a top 10 operating position of wind solar and battery assets. In the Australian national energy market. Together with a high quality development pipeline focused on wind, and battery assets, and an accomplished development team. Our acquisition of the New And Victorian portfolio was an event driven opportunity that showcased HMC's ability to move quickly in a complex situation. Allowing us to secure a large scale and high quality clean energy platform that is the technologically diversified six fifty two megawatt operating portfolio with a very significant 2.8 gigawatt long term development pipeline. The quality and scale of the Neewon platform acquired at an attractive acquisition price Combined with the store energy business, and its large pipeline of utility scale battery development, presents a compelling opportunity for institutional capital partners to participate in our energy transition specialist team.

During the first half year, we have also made significant investment into capability and future growth of the platform, via our investment into store energy. Key hires have been made throughout the period to strengthen engineering grid and development capability, and we also continue to make strong progress on near term store energy battery projects. With 1.5 gigawatts on track and on budget, for final investment decision within the next two years. Now turning to Slide 16, to discuss the progress made on Platform capital raising. We remain on track to reach first close on our initial $2,000,000,000 plus fundraising. In the second half of financial year twenty twenty five. The attractive deferred settlement terms we were able to negotiate on the $950,000,000 Neowen acquisition means that the initial consideration is due in July, the remaining $200,000,000 equity is due in December of this year. We have received a significant level of interest from domestic superannuation funds to be foundation investors. In HMC's energy transition platform who are attracted to both the long term energy transition fundamentals and HMC's capability. We are well advanced with multiple cornerstone investors and have appointed Campbell Luchins as global placement agents. The final point I would like to highlight is the compelling acquisition price we were able to secure the NII and Victorian assets for.

Q2 speed and high execution certainty. In an event driven situation. Acquisition price represents approximately a 15% discount to replacement costs for the operating assets and approximately a 20% discount to recent transaction comparables. For operating assets. And that is all assuming zero value to the high quality pipeline of approximately 2,800 megawatts of wind and battery assets. Since HMC has transacted on the portfolio, strong progress has continued to be made by the Neo and development team on the development pipeline. [indiscernible] being announced as a successful recipient of a federal government capacity investment scheme contract. It is the only wind farm in Victoria to have been awarded this. The quality of the seed asset portfolio the attractive entry price metrics, and the strong growth trajectory, all position HMC well to reach first close on the energy transitions I I'll now hand over to Chris Ma to discuss HMC's digital infrastructure platform. On Page 17.

Thank you, Angela, and good morning. By our introduction, I joined HMC Capital five months ago and I'm leading the integration of the Australian digital infrastructure business and the HCF certification process for the Sydney One asset. I am also a Non Executive Director of the Digico Infrastructure REIT entity. And previously held senior roles in the digital infrastructure sector, including with Telstra and Brookfield Asset Management. The first half of FY twenty twenty five was a landmark period for the HMC Capital digital infrastructure business. HMC now manages $5,000,000,000 of digital assets across Australia and The United States. November 24, we announced the successful establishment and underwriting of the $4,300,000,000 Didjukao infrastructure REIT IPO. Digico is now a global owner operator and developer of hyperscale enterprise and colocation data centers. The growth opportunity ahead of Digico is enormous. With two thirty eight megawatt of planned IT capacity incorporating 76 megawatt of installed IT capacity, that includes the Chicago 1 site, which is fully contracted and under construction, [indiscernible] 162 megawatt of future expansion IT capacity. Post listing, HMC increased its ownership in Digico REIT to circa 19% highlighting our conviction in the sector and the growth outlook. [indiscernible] Moving to Slide 18.

Digico as flagged in its IPO prospectus is looking to explore capital partnerships across the platform. Discussions are underway with a number of capital partners globally providing an opportunity to accelerate growth across the platform by crystallizing valuation gains and improving our cost of capital. We are also expecting to launch a U. S. Focused public non traded REIT in the second half of FY twenty twenty five. [indiscernible] Existing assets across the platform together with pipeline assets currently under due diligence, would form seed assets for future Australian and U. S. Focused operating and development funds. Turning to the Digico trading update on Slide 19. [indiscernible] Digico's operating business is performing well with strong momentum. Trading to the January was in line with forecasts and Digico reaffirms the Prospectus pro form a adjusted [indiscernible] on an annualized basis. Upon completion of the Chicago one site, which was fully funded by the IPO proceeds, Pro form a adjusted EBITDA on an annualized basis for FY 2025 is expected to increase from 97,000,000 to $163,000,000 The integration of the former Global Switch and Iseak business is progressing well. Under the new Digico brand. And expected to complete in the second half of FY 2025. [indiscernible] We see significant cross sell opportunities and operating efficiencies across the acquired Australian businesses.

We are drawing on the strengths of both businesses from a customer footprint management expertise and operating perspective as we seek to build the leading data center platform in the country. We are also drawing on the experience of the HMC Group to drive leasing momentum and are implementing changes to ensure alignment with HMC's existing legal and compliance, investment committee and IT processes. We are systematically meeting with all the top hyperscaler and customer groups in the market and we've had a strong response to date. [indiscernible] Moving to Slide 20, and commenting on the Sydney One site. The Sydney One data center is the premier carrier hotel or colocation data center in Sydney. It is the only large scale data center in the Sydney CBD with significant megawatt capacity growth potential. Since taking ownership we are progressing the CityOne asset through a major uplift program. We are focused on achieving HCF certification by mid-twenty twenty five. We've appointed TELUS, the defense contractor to uplift security and we have strong engagement with government. The densification and upgrade program for the City One site which will lift capacity by 62 megawatt is also progressing well. We are in the process of finalizing the 70% design We have placed orders for long lead time equipment.

And will be seeking tenders for contractors. The modular design for the upgrade program incorporates significant flexibility to meet customer requirements. The flexibility in the design, combined with the extensive redundancy that already exists at the City One site, and the experienced management team overseeing the upgrade, means we are confident we can deliver the upgrade without disrupting existing customers. I'll now pass back to David to discuss HMC Capital's sustainability strategy on Slide 21. Thanks, Chris. [indiscernible] We continue to play an active role in the transition to a greener and low carbon economy. HMC's energy transition platform [indiscernible] its investment in store energy a battery platform with an investment in Neo One's Victorian portfolio of renewable generation and storage. As a result, we now manage a renewable portfolio that consists of six fifty two megawatts of operating assets, and 5.5 gigawatts of development. Our real estate platform continues to invest in building efficiencies and solar generation. Remaining committed to the zero net target [indiscernible] carbon target in financial year 2028. [indiscernible] continue to make positive community impacts through our social initiatives, The HMC Capital Foundation will be awarding two indigenous leader scholarships hips the 2025 academic year, through the Monash University William Cooper Institute the HMC Capital Foundation also supported two other charitable organizations through calendar year '24 including Feel the Magic and got you for life.

We're currently in the process of septum submissions for further funding grants in financial year 2025. [indiscernible] Across our real estate platform, we've extended our national partnership with ITUP to fund its 2024 evaluation report.

The report aims to help the organization to measure the impact and identify additional opportunities in their work to feed hungry kids across Australia. We're actively integrating this Australian sustainability reporting standards ASRS, in preparation for future mandatory reporting by our relevant funds, HMC was reclassified to asset management and custody banks [indiscernible] and received a Misky ESG rating of [indiscernible] for financial year [indiscernible] And '25. Over the course of calendar year 2024, HMC Capital has transformed its group platform the establishment and growth of new verticals in private credit energy transition, and digital infrastructure. These complement existing strategies in real estate and private equity. In order to ensure that the group's sustainability objectives remain appropriate, and relevant, HMC Capital has commenced a new materiality assessment to review its targets and framework. Importantly, our philosophy will be to establish ourselves as a leader in sustainability by ensuring our carbon footprint for managed funds can be offset by the energy we generate by funds managed in our energy transition platform This is due to be complete by the end of financial year 2025. I'll now hand over to William Mcmickin to discuss our financial results.

Thanks, David.

And turning now to Slide 23, HMC recorded pretax operating earnings for the half of $2.00 $2,000,000 or $0.52 per share.

Management fee revenue increased to $126,000,000 was driven by the AUM growth across the group, including the new private credit and digital infrastructure funds. Performance fees of $3,000,000 were largely attributable to real estate APS1 and the U. S. Stratcap Digital Fund. And a reminder that performance fee for the Capital Partners Fund is tested annually at thirty June and hence any revenue will contribute to the second half.

The performance fee accrued by the fund for the six months to thirty one December is $24,000,000 and as at the fourteen of Feb, had increased to $36,000,000 Investment income of $128,000,000 was driven by $112,000,000 contribution from the HMC Capital Partners Fund investment. [indiscernible] Expenses for the half are running below revenue growth with new fund investment and asset teams accounting for the main increase. An interim dividend of $0.06 per share has also been announced and is 100% franked. Moving now to the balance sheet on Slide 24. [indiscernible] The HMC balance sheet's capacity to support new funds management activities was evidenced in the first half. With the underwriting of seed assets for the DGT IPO which completed its listing in December.

We the investment into new fund strategies private credit and energy transition. I [indiscernible] HMC's balance sheet recorded net tangible assets and undrawn debt of $1,900,000,000 and gearing at 7%. [indiscernible] Turning now to Slide 25. HMC continues to to take advantage of its increasing credit profile and lifted its funding lines to $675,000,000 as at December. These debt lines provide valuable financing capacity to the group to support new funds management [indiscernible] I'll now hand it back to David.

Thanks, William.

HMC is moving into the second half of financial year 2025. With great momentum across our platform. Underpinned by our strong reported H1 twenty twenty five operating EPS of $0.519 per share. Based on continued strong trading into February 25, annualized full year 2025 operating pretax EPS is currently tracking at IT.

Dollars per share.

Importantly, as we look at our earnings composition for future periods, we will see the full year contribution of recurring funds management income from the private credit and digital infrastructure funds recently established. We believe baseline annualized recurring earnings are now running at between $0.45 to $0.5 per share. Combined with our track record, being able to identify and execute [indiscernible] complex transactions we are confident our ability to maintain our earnings growth momentum into the future. Our financial year 2025 guide dividend guidance is $0.12 per share This is consistent with our strategy to maintain the dividend At this level, and reinvest retained earnings into value accretive growth opportunities. I'd like to thank everyone for joining the call this morning and now hand it back to the operator for Q and A. Thank you. Your first question comes from Simon Chan with Morgan Stanley.

Good morning, guys. Hey, David.

The first question relates to the $0.8 trading outlook. Last time you gave this trading outlook, I think it was $0.7 at the end of November. Just wondering what the delta is over the last couple of months. Is it more CP1 driven or is it more fees associated with with the success on the retail real estate platform? Or is it something else altogether?

No, I think you're probably right. Most of it's coming from the performance fees from CP1 and underlying investment income that we're generating there.

Okay, fair enough. Second question is just on Pateen. You've had it for a number of months now and I appreciate the update on Slide 13. But can you just I guess give us some details as to what changes has the team implemented? I know you mentioned about the financing facilities, etcetera. But in terms of average ticket size, how is that tracked? And any and that pie chart on Slide 13, do you envisage that shifting towards some of the more smaller sectors over time? No, I think on Slides thirteen and fourteen, think we attempted to give you a bit of a snapshot for the changes we've made across the platform. Importantly, We do within the patent business fully intend to stay focused on the core middle market residential real estate sector. We will potentially have the capacity to increase ticket size. I don't think we'll be going down In terms of ticket size, we'll be looking to increase. I think recall that when we made the acquisition, we were sort of sitting at an average ticket size in the mid [indiscernible] we'll probably look to increase that over time. So that will give us obviously AUM velocity.

And probably expose the business to probably better quality borrowers and counterparties. The changes that we've made is we've really fully integrated the business within our risk management framework. We've redeveloped the investment committee process We've hired a new Head of Credit from one of the domestic Aussie Trading Banks. And importantly, the legal and compliance function has been materially upgraded. So that's all come from the appointment of new executives and new new team members, and what we're looking to do is institutionalize the standard of the business moving forward.

Great. And just my final question is on tax I'm not sure if this one's more for Will, but it looks like in the P and L, you guys are now 30% The tax rate is about 30%. Does that imply one, this 30% will be the run rate going forward, I. E. You've pretty much shoot up all your tax losses And two, have you then given thought to just provide kind of trading outlook going forward on a post tax EPS basis rather than a pretax Yes, Simon. So there's still $150,000,000 of tax losses that exist pre IPO. We're still going through a process to to work out the path forward. So I think your forecasts assume 30% there's still an option there. [indiscernible] We'll update the marketing time. [indiscernible] Your next question comes from Caine Hannon with Goldman Sachs. [indiscernible] I said three on Digico, if that's alright. Maybe just the Seed one leasing activity comments you made.

Obviously discussions ongoing and encouraging. Just any more color you could provide around what happening here, potential timing and size? I know we spoke back at the tour, but helpful if there's any updates there that's more detailed. Chris, do you want to take that?

Thanks, Kane. Look, just a couple of comments. As I mentioned in my remarks, [indiscernible] We've had very strong engagement with customer [indiscernible] Obviously, as well known, There's a somewhat of a contingency around the HCFC certification processes are remarked that's the discussions with government are very encouraging and promising. We're running hard at that process. And we're targeting mid-twenty twenty five. I don't really have much more to say at this point other than other than very encouraging.

What I'd add to that, Kane, is literally it that business has been under the umbrella of the group for literally two months. Leasing activity had been frozen, what, for the best part of five years. We're going through with a process of bringing the asset back into market. There's been a very proactive engagement strategy with all the major tenants in the market. And as Chris said in his remarks, the engagement from the counterparties has been very, very positive. So we remain very optimistic in terms of our ability to for that asset ramp up its leasing over the next few years.

Yes, that's helpful. Thank you. Just a comment in the slide as well around The U. S. Development sort of the one gigawatt pipeline. I don't think I've seen that before. Is that new land that you need to acquire? And just any sort of commentary around where that one gigawatt Pipeline is So I think what we're referencing there is really a range of different development opportunities that that we identified at the time of the IPO. So you obviously had The asset in LA we are circling around some other opportunities in that market. There are a lot range and a spectrum of opportunities. It [indiscernible] more advanced opportunities. But at this time, We're really just evaluating everything as it comes across our desk and looking for more to take on some global institutional partners to pursue some of those high growth opportunities as well as with Digico.

Partnering.

But again, as we said earlier and we've given some pretty clear breadcrumbs there in the presentation this morning around our [indiscernible] on partnering, capital partnering, We've got a lot of partnering opportunities for Digico with both institutional capital and wholesaleretail sources in The U. S. Market. So what we'll look to do is we'll hunt for the best cost of capital and the best funding partners we can for the for the REIT moving forward.

Yes, that makes sense. And just lastly, just on that capital partnering. Just the ranges of sort of asset ownership that you're talking to, the $0.5 to $0.75 50% in The U. S. Just a sense of what drives the range? Is that sort of deal by deal sort of what's been offered? Or how quickly some of these opportunities come up and then you'll need to be able to fund it? Interest if you talk about that, please.

Look, I think what we'll be doing is we playing a bit of a balancing act there. We're so optimistic in the Sydney asset and we're so optimistic in our Aussie business that we'll probably we've had multiple inbound inquiries from very credible parties, both financial and strategic. Since acquiring the asset, we need to just balance out the fact that we want to get some wins on the board We want to get through that HCF process. And then look to introduce some capital and realize what we believe to be probably the best asset in the country strategically in terms of the colo space. We'll be patient there. But we know we've got the interest, we've got the demand coming at us pretty quickly. And then in The U. S, what we've got there is a different style of business. It's an owner developer type model. And what we're looking at there is that yield type vehicle is quite a unique strategy in The United States. No one else is pursuing that. There'll be demand through our broker dealer network. To distribute wholesale and retail capital. But probably institutions are coming at us again saying, we don't get the opportunity to invest in this asset class and generate a yield.

So we are pretty actively deploying quite a lot of resources into that market. Adam Baxter, our Head of Institutional Capital with is focused in on that market is based in New York. So Claire and We'll have more information to to give the market around what we're thinking there. In the coming months.

Your next question comes from James Joyce with CLSA.

Just following on from the last question quickly. I mean, idea of sort of raising capital out of The U. S, that's using existing straight cap network. I assume or is that dawning that out So it's a combination. Stratcap had embedded within it when we acquired the business a U. S. Broker dealer So what we've done is we've been through a a pretty detailed process through the last six months to relaunch one of their funds. So that will be U. S. NAVREIT as we call it, it already has a couple has assets in it. And we'll be looking to introduce the market back into that asset We've gone through a a process where we've taken it from a non public to a public NAV REIT, So that will obviously be a source of funding for yielding style assets. And then on the institutional side, Adam Baxter, and Claire, who both in our institutional part of our business are really coordinating and harnessing a lot of global capital that wants to partner with us. In regard to some of those assets. And so what we'll look to do is we'll look to parallel track those discussions over the next six months.

And really look to introduce that capital into both the existing assets, we haven't potentially realized some uplift in the valuations as well as help us fund future acquisitions and future growth.

Yes, guys. It's clear. And maybe following from Simon's question, on the $0.8 Just clarify if you think, is that to is that to December 31 to the February 17? That guidance that you provide out. And is there anything that you call out that it's Not annualizing or or is that annualizing that's lumpy from the first half?

So what I would say to you is [indiscernible] the way I think about it and then we'll probably explain it much better than I can, but I sent I explain it in very simple terms. We reported $51 for the first half That does not include the performance fees out of HMCCP, so you can add that in. And then what we talked about in the presentation this morning was a really, really material and very important point that I think anyone should go away from this call and not understand. So the back half of last year, we brought private credit onto the platform. So now we have recurring income streams coming from private credit. Obviously bought Digico REIT to the market and we obviously get renew recurring income streams from our digital business. And then next year, we'll obviously start to see energy transition platform come through. However, just with the income streams from the core business we have today, and the funds we have under management today our core business run rate on an annualized basis is running at between $0.45 and $0.5 a share. Now what we're saying is if you divide that by two, that will give you the half year contribution from management fees, investment income So you add that to what we've reported.

You add on top of that the performance fee we've talked about today, and then obviously that gets you to the $0.8 We think that's a number that's achievable. It's very much now starting to move towards a very much a recurring annuity based business. We set out with this objective two years ago. A lot of people said we could do it A lot of people said when we reported the '24 result and we had $0.37 they said, oh, only half of its recurring. Well guess what? Less than eight months later, we've more than doubled that number. So we keep delivering and as we've always said, we like to overpromise and over deliver at HMC. And I think that's really starting to come through in the numbers.

Okay.

That's very, very clear. Thank you. And then one more, where do you think you can push the credit platform come to the second half.

James, I don't want to use that word push. We're not pushing. Being very prudent. It's obviously a time in the market where being prudent is going to be important and will prevail We're really institutionalizing that platform. We've got a great team of investment professionals there. I think you'll get to meet them at the Investor Day. The point and the message we're making and this is really starting to come through in some of the materials that are being developed, the size of that market opportunity, it's growing. But it's really the fact that the domestic Aussie banks have had a disproportionate share of lending in Australia historically. If you look at what's transpired in The U. S, as private credit starts to become a bigger share of the pie, we just think naturally the market will grow, the opportunities will grow, as more players come into the market that's positive not negative because that means that these assets can be these loans can be refinanced amongst private credit providers. So we just feel as though the market momentum there with the right team and the right opportunities and the right risk controls in place puts us in a really strong position Overlay on top of that one really unique thing HMC's DNA, HMC's track record of being able to [indiscernible] [indiscernible] complex [indiscernible] means that we'll be a leading player in this space because we will be able to become a solution provider to corporate Australia and asset based opportunities in the future.

Okay, that's great. Thank you.

Your next question comes from Tom Boodore with UBS.

Hey, Good morning, David. Just wanted to pick up on that lending business and just ask a question about the the corporate and asset based finance There's a mention of a $100,000,000 transaction there in December 24. Can you give a little bit of color around that transaction and what sort of returns or or industry that was, I presume it's not real estate. No, it actually was an asset based real estate loan, Tom.

The returns for invest, it was a large scale loan. It was more an opportunity originated through our corporate team. It really played into the DNA of the group. It was very much a repositioning story. It had been an asset that had been through a couple of hands over the last few years and been knocked around through COVID. So what we saw was very attractive risk adjusted return for our underlying investor base. Sort of at an asset level financing delivers about an 11% IRR. For investors and potentially we've been able to will probably outperform that a little. Over the next couple of years as the assets repositioned. So we feel that was a really great opportunity to showcase the talent of our team and work on what was a complex repositioning asset.

So to be clear though, this is outside patent or this is part of the patent business? It was originated by a corporate team. And financed through the patent platform using some of our wholesale line.

Okay, great. Thanks. And then [indiscernible] [indiscernible] transition fundraising. I'd just be interested in understanding what the return target are from an investment perspective and also sort of how the fees in that platform compared to the rest HMC platform Look, I'm not going to get into speculation on that on this call.

Tom But what we would say is that the investors that we're targeting for first close domestic Aussie super funds As we said earlier today, [indiscernible] look to bring Campbell Lutchen's into the picture later in the year. And obviously then take the fundraising global These things are bespoke in terms of the fee arrangements that we would be looking to achieve. Fees will be linked to size of checks, size of commitment, It'll be a base management fee, with a performance fee element to it. Will be a closed end style structure but really with a focus on building a business and building a platform. So what we believe is if we get that right, you'll be talking about returns in the mid teens.

Okay, great. Thanks. And then just one last question maybe for Will.

Just would be interested in understanding where Capital Solutions sit in the P and L. Is it in the other income by? You're spot on, Tom. [indiscernible] approximately $15,000,000 contribution for the first half from realized and fair value gains.

And I might Tom on that just in terms of capital solutions, we've just taken the decision with this result given the five major verticals that we now have to really incorporate solutions within the other parts of our business and ability to represent the balance sheet investing activities of the group rather than report it separately. Probably in the future don't want to get into the ins and outs of what we're we're doing on the balance sheet. To excruciating levels of detail. As that business evolves.

Yes, that's clear. Thanks.

Your next question comes from David Pobocki with Macquarie Group.

Good morning, David, Will and team. Thanks for taking my questions. Maybe just the first one for Will on fees. Could you remind us again what agency expects to be in the door on transaction fees and face management fees from Digico in FY [indiscernible] did all the transaction fees fall in the first half, please?

Yes. I mean, there was the establishment fee of approximately $60,000,000 that fell into the first half. And then there for about two weeks December.

So you'll see your usual 1% blended across the AUM for the second half.

Thanks, Will. And just going back to Payden, Capital, are you able to provide what the EBITDA contribution was for the half for that business? And where does AUM sit for PATEN today?

So you'll see in this segment notes for the four d We now report earnings across the divisions. So the credit number that you see of $7,000,000 that's comprised of the CAF team and then the patent business. So on a like for like, looking at Payton specifically, it's just under 10%. And as we called out in the presentation, there's been a lot of investment into revenue generating personnel that will expect to see a higher kick in the second half.

So just to add to that, for the Patent business [indiscernible] second half back ended. The second point is we have materially increased [indiscernible] in the business and across the credit platform being onboarding the CAF team. So they've got for new dedicated executives, [indiscernible] We've increased some additional resource into Paton in terms of Origination capability, we talked about opening a Gold Coast office. We've opened a Perth office.

That's what's resulted in a $3,000,000,000 pipeline sitting here today. And so we're sort of thinking about that business as being a sort of run rate contributor to the group of $25,000,000 to $30,000,000 over the next little while and then as it grows, we'll obviously see some velocity and momentum off that base. [indiscernible] what you'll see in the first half is really some front end and [indiscernible] stabilizing the risk and management platform And then obviously, we'll expect it to take off in subsequent periods Thank you. And just the final one, on your position in Digico of 19%, have increased that. Since the IPO. If you could please just talk to that move and your intentions how you see them at the moment around that position over the next twelve to twenty four months, please?

I think I said today we're a very high conviction thematic. We took advantage of the sell down prior to Christmas and took another 1%. At what we believe to be pretty attractive levels. As we've always said, we like to co invest in our vehicles. We like to demonstrate our support. And our conviction through our equity positions longer term, all our capital across the group is always seeking great returns. At this stage, there's no intention. Obviously, we're subject to escrow there at Digico as well, but there's no intention to sell down. We've got such conviction in that in that business. We'll probably continue to hold that level of shareholding for the indefinite Indefinite future.

Thank you very much. I'll turn it over. Thank you.

Your next question comes from Richard Jens with JPMorgan.

Thanks, Doug. Just on the Energy Transition Fund, how much external equity do you expect to rise as part of the first close?

So I'd say to you that [indiscernible] [indiscernible] During the presentation, did talk about $950,000,000 is the purchase price for Neowen obviously got the store platform So what we're looking to do is probably a number for first close of somewhere around $400,000,000 to 500,000,000 being sufficient capital to to settle those acquisitions and support those acquisitions, plus we'll make a co investment of the HMC balance sheet somewhere between $100,000,000 to $200,000,000 Okay.

I think on top of that, 400 to 500 external, Yes. Well, I don't want to put specific numbers on it, but that would be target that we're sort of trying to with a view to taking that up to $2,000,000,000 Thank you. And then just potential initiation fee, so they second half or an FY '26 realization? For what? [indiscernible] Which one for [indiscernible] Correct.

You would expect those fees to be coming through in next financial year? Not this year.

Yes. [indiscernible] And just one for Will. Just 24 mill performance fee provision you called out, To this, clarify how that's treated in the accounts? It looks like there's an expense I can through the P and L Yes. So because it's consolidated on the balance sheet, It is there, but HMC does not recognize it in its earnings.

Okay. And does it impact the balance sheet?

I mean, for non controlling interest, yes. But If you look at HMC the balance sheet, there are we report is HMC's interests are no.

Okay.

Your next question comes from Ben Brachael with Berenjelly.

Hi, David. Just reference your comments and Chris' earlier on the establishment of the U. S. Non traded REIT.

Do you see there is a risk of potentially having an overlapping mandate with DGT or is the scale of the opportunity big enough for that not to be an issue.

And we just think the scale of the market opportunity is so significant that trying to bring something to market in this space as long as it's well thought through and it's complementary What it will do is hopefully DG Co access to a partner with a competitive cost of capital to help it take on some of the magnitude of the opportunity ahead of us. Really no one is focused on that space in The U. S. We feel as though we've got first mover advantage and we're going to consolidate that first mover advantage. We're going to take take advantage of it and we're going to be first to market across every platform we possibly can The opportunity is massive. Yes, excellent. Thanks, David.

There are no further questions at this time. I'll now hand back to Ms. Patilla for closing remarks.

I just want to thank everyone for joining the call this morning. Hopefully, we're coming on to just over an hour and a bit. In terms of the presentation this morning, I think we've been able to paint a picture of a much more sophisticated business, much larger scale than we had this time last year.

And the team around me here in the room just remains incredibly motivated excited by the future and we look forward to catching up with our investors over the coming days. Thank you very much for joining the call.

That does conclude our conference for today. Thank you for participating. You may now disconnect.