NEXTDC

About the author:

Author name:

By Nick Harris

Job title:

Senior Analyst

Date posted:

17 November 2014, 9:11 AM

Sectors Covered:

Telecommunications, Technology

NEXTDC (NXT) hosted their Annual General Meeting in Sydney on Friday 14 November. As expected the trading update was a net positive.

Key takeaways

NEXT has guided to be EBITDA break-even in 1H15 - six months earlier than previously guided. We are forecasting a A$250,000 EBITDA profit in 1H15.

Sales for the current half were 1.2 MW vs full year guidance for 2.4-3.0 MW. As at 12th November 2014 NXT had sold 13.1 MW (of 35.25 MW in total). This takes utilisation to 37% and is in-line with our forecast for 13.1 MW sold at 31 December 2014. NXT have reached our forecast six weeks early. Although December is typically (seasonally) slow we'd expect more sales to follow and NXT to end the calender year ahead of our forecast.

NXT have not upgraded their new sales guidance but (in our view) it now looks easily achievable. Even if sales rates don't accelerate from here they will still hit guidance, and we struggle to see how sales won't accelerate from here.

Investment view

Achieving an EBITDA positive state is an important milestone for NXT as it proves the company can generate capital and this broadens the range of potential investors. We remain comfortable with our high conviction call on NXT. We expect minor upgrades following the AGM and this hopefully marks an upgrade cycle for the stock.

We retain our Add recommendation and share price target of A$2.39.

More information

Morgans clients can access our detailed research on NEXTDC (NXT). If you are interested in finding out more, please contact your nearest Morgans office.

Disclaimer(s): Analyst owns shares.

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