NEXTDC

About the author:

Nick Harris
Author name:
By Nick Harris
Job title:
Senior Analyst
Date posted:
01 September 2017, 12:06 PM
Sectors Covered:
Telecommunications, Technology and Financial Services

Result snapshot

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.

Noteworthy items

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).

Investment view

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.

More information

Morgans clients can login to view our detailed report and upgraded share price target for NEXTDC (NXT). Alternatively, please contact your nearest Morgans office for access.

Disclaimer(s): Analyst owns shares.

Morgans Corporate has been appointed as a Corporate Adviser to 360 Capital Group.

The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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