Oct 6, 2021

Sentiment: Sideways

Type of Trade: High Growth

Industry: Data Centre - Data Storage

Sector: Information Technology

NEXTDC is Australia’s leading developer and operator of Data Centres infrastructure centre. The company focus on co-location and interconnection between enterprise and government customers, global cloud and information and communication technology, or ICT, providers and telecommunication networks. NextDC provides physical space, colling, power and security services and offers optional technical and project management support. The company’s tenants house their servers within the data centre and can connect to each other via physical and virtual connections.

NEXTDC’s data centres and custom colocation solutions are engineered to grow in line with the dynamic nature of businesses. Enabling greater flexibility, speed and agility through solutions that scale and prevent friction, supported by the country’s most network-dense and highly skilled ecosystem of cloud platforms and digital services providers.

The company has a diversified revenue model which majority comes from contract utilisation

✅ Revenue up by 23% to $246.1M

✅ Underlying EBITDA up 29% to $134.5m

✅ Contracted utilisation up 8% to 75.5MW

✅ Customers up 13% to 1,547

✅ Interconnection up 13% up 14,718

✅ Decreased loss of $25M compared to the FY20.

According to the company Data Centres will consume as much as 1/5 of the world’s energy by 2025. ICT represents the fastest growing volume of CO2 emissions. Hence, NEXTDC has strong footprint on Zero Waste, aiming for 100% renewable by 2030.

✅ Energy Efficiency

✅ Carbon Neutral Operations and Services

✅ Renewable Energy

✅ Minimising water and waste

✅ Giving Back to Communities with three major projects in its so called offset portfolio.

✅ Social and Sustainability, diversity and inclusion

✅ Supply Chain Management

FY22 Guidance of $285 to $295m (up 16% to 20% on FY21)

Underlying EBITDA guidance of $160m to $165 (up 19% to 23% on FY21)

✅ Capital expenditure guidance in the range of $480m to $540m.

✅ 700 Megawatts Target Capacity with three major project currently in development: M2 Melbourne with Target IT capacity of 60 MW, M3 also in Melbourne with Target IT capacity of 150MW, and S3 Sydney with Target IT capacity of 80MW, S4 Sydney with Target IT Capacity of #00 MW.

✅ Huge Emerging Market as more and more companies and users are using cloud base services.

Technical Analysis (Restricted for VIP Members only)

If you have invested in NXT last year you would be losing 5% of the investment, since SP is currently trading 5% below 52 ago SP. It appears that most of the growth was taken in the previews year. Which the stock has risen by over 100%. In the last 52 weeks the stock has been moving sideways and we could see a potential breakout soon as the fundamentals are also strong and the demand for data centre keeps on increasing.

SP swings are not great but offer up to 22% SP swings between up and down cycles in a very hot industry. Data Centre are in extremely high demand and that should easily sustain the SP around the currently levels for NXT despite the correction in the technology sector which seems to affect the SP. We would say that NXT is also a infrastructure company.

✅ SP is currently trading 14% under SMA giving a good entry opportunity at technically discounted price.

✅ Volume slowly decreasing on the downside could put the SP close to a reversal point.

🚩 Red candles in the Heiken Ashi shows that further downside in the short term is still a possibility.

🚩 SP is currently trading under SMA and under EMA which shows a negative sentiment .


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