$HTWS is a criminally undervalued high-quality EM digital infrastructure stock with momentum in its re-rating to blue chip.

**Helios Towers plc** (HTWS.L, HTWSF) operates under the traditional "TowerCo" REIT business model, but instead of focusing on the developed world like $AMT, $CCI and $SBAC they operate entirely in Africa (Tanzania, DRC, Oman etc.). They own an extremely diversified portfolio of 15k towers and they lease them out to mobile cellphone service providers. No single tenant represents more than a 1/4th of the business, and they are all of high credit quality. The first "anchor" tenant drives the initial capex, but the subsequent tenants (i.e co-location) drive the gross margin up substantially (easily 60%+). These nice and fat margins are well protected through USD-priced 10-15 year long leases, which are CPI-indexed, have energy cost escalators. Tenants are likely to keep renewing leases given the unparalleled breadth of the Helios's network; Helios is often the leader with the highest number of towers in the respective local markets it covers, effectively has a natural monopoly plus they have unparalleled uptime hours which for Africa is curcial. Building your own network from scratch requires insane amounts of start-up capital, dealing with local politics, and all the best spots for towers are already taken. It's not like in Europe or North America where multiple independent networks already exist. This is why Helios has a relatively high tenancy ratio at roughly 2,2x per tower.

The core thesis for Helios can be declined in these main points:

(i) **The runway for growth is much bigger than for traditional TowerCos**: Africa only has 35-55% smartphone penetration vs 80-90% in the west. Even if well-capitalized competitors enter Helios' core markets, they would be complementary and eat its future growth rather than threaten its existing portfolio. Management is guiding for 9% revenue CAGR over the next few years and investing heavily into expanding the network, they have an historical track record of achieving a ROIC of over 30% on growth capex in the last 2-3 years.

(ii) **The company's cost of capital is too high relatively to its peers and likely to adjust downwards.** On the debt side, the company is now financially stable and is already rating upwards. Moody's has upgraded to Ba3 earlier this year. On the equity side, the company has a high equity risk premium (10-11% vs 4-5% for other stocks) because it's an emerging market stock. This is fundamentally irrational given that the portfolio is extremely diversified across countries, tenants pay in USD, and given that the company has super strong corporate governance because it's headquartered in the UK. Part of the discount is because it trades in London where the youngest stock trader is 65yo. EV/EBITDA is 9,5x, while blue chip comparables trade at 17-22x.

**The bull case**: Management achieves projected growth and through 2030 reaching EBITDA of ca. $730M and the company trades like a blue-chip TowerCo at 15x EV/EBITDA. At current prices, this is a 40% IRR for 4 years! Stock should probably trade today at **640 GBX. This is a 2-3x bagger.**

**The conservative base case:** If we assume no real growth an just valuing the current portfolio as-is, we get roughly a $340M/year unlevered free cashflow (FY26 EBITDA - maintenance CapEx - figurative taxes) or a $230MM levered free cashflow (subtracting 8,5% debt interest and adding back tax shields), which results in a 7% both levered and unlevered FCF yields at the current price of 235 GBX. Given the quality of the business, this is still incredibly attractive. It wouldn't shock me if some PE/Infrastructure fund decides to take this private at a meaningful premium (think **300-350 GBX** range) and load it up with cheaper debt.

*Disclosures: I am long shares at an average price of 190GBX. This is not investment advice*