NEXTDC (NXT) reported a strong result, with EBITDA of A$49.0m at the top-end of guidance and c2% above our forecast of A$47.9m. All operating metrics grew strongly, with 38% revenue growth falling through to 77% EBITDA growth and normalised NPAT up strongly to A$11.7m. Contracted utilisation increased to 31.5MW (+21%) and billing utilisation increased to 29.5MW (+27%).
Operating cash flow increased 69% on the previous corresponding period to A$44.9m and lower capex saw NXT end the period with cash and liquids of A$368m.
NXT's next generation of data centres is of a higher calibre (now Tier IV Uptime Institute Certified from Tier III) which shows that NXT continues to innovate and bring improved quality to customers. B2 opens with this certification which is an Australian first. NXT provided an update on its generation 2 facilities, targeting B2 and M2 openings in late Sept/Oct 2017 and S2 in 1H19 (previously 1H18). While this is slightly delayed we had minimal revenues and negative EBITDA so the delays do not have negative implications for FY18.
NXT also upgraded its targeted capacity and is now forecasting 40MW (vs 25MW previously) for M2 and 12MW (vs 6MW previously) for B2 over two stages. NXT now expects to rent the S2 land site and has entered into a 45-year lease agreement.
FY18 guidance in line with consensus; outlook remains positive
NXT provided FY18 guidance, comprising:
- revenue of A$146-154m (including interest income);
- EBITDA of A$56-61m; and
- capex of A$220-240m (including Generation 2.0 builds).
This guidance does not include any impact from NXT's proposed takeover of AJD which is still underway. Our forecasts do not include any AJD impact (other than including in our capex the dollars NXT has already spent to acquire approximately 21% of AJD).
We expect an update in coming weeks but have elected to wait for finalisation before including this (higher EBITDA and higher interest expenses are the likely outcome).
We continue to rate the long-term growth profile of NXT as attractive given the secular growth story. NXT now moves to the next stage of its evolution as its substantially larger, more efficient and more evolved as the Generation 2 data centres come online over the next 12 months.
Upcoming catalysts for the stock relate to concluding the AJD takeover and the potential for cornerstone customers in S2.
We retain our Add recommendation with an upgraded share price target.
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Disclaimer(s): Analyst owns shares.
Morgans Corporate has been appointed as a Corporate Adviser to 360 Capital Group.
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