NextDC Limited (ASX: NXT)

Strong footing for FY18: NextDC expects to grow its national footprint to a projected capacity of 126MW across Australia in FY18 at the back of B2, M2 and S2 data centres. New developments along with additional customer contracts and rising contracted utilisation level will help the group achieve 18%-25% revenue growth over FY17 and 14%-25% EBITDA growth while cost expenditure will be up to take care of the new centres opening and energy prices. On the other hand, Asia Pacific Data Centre (APDC) Group recently announced that the first round of the global sales campaign for its three data centres received a very strong response with expressions of interest at a substantial premium to the current book value. APDC also received a formal notice of NextDC’s rejection pursuant to its rights from the first refusal of the sale of the Properties at $300 million. Meanwhile, NXT recently elevated its concerns over the governance track record of the 360 Capital Group which now controls APDC but with limited true independent controls. NextDC considers that APDC is no longer fit for the purpose for which it was established and the APDC Trust, which holds APDC’s data centre assets should be wound up. Moreover, NXT advised that it has experienced significant interest in its new Sydney S2 facility that is currently under development and the Company has already received orders for more than 5MW capacity. Development and construction of S2 is currently underway and the site is expected to open in 1HFY19 but with an initial capacity of 6MW. We can also see that the contracted customer utilisation increased in FY17 to 31.5MW from 26.1MW in FY16. During 2017, the group experienced a significant growth in terms of an increase in the number of customer orders and data centre revenue as the Data centre revenue for the year 2016 increased from $89.3 million to $117.6 million in 2017. The strong demand continues for its premium data centres across the national footprint. The Company is performing well in terms of its share prices and the prices increased by approximately 35.48% in the past six months, but there was a dip of over 10% in the past one month (as at January 22, 2018). We recommend to “Hold” the stock at the current price of $5.69, given the growth potential.
 

Market Growth Indicators (Source: Company Reports)
 

BHP Billiton Limited (ASX: BHP)

Developments on track: Recently, BHP Board approved an investment of US$2.5 billion for the development of the Spence Growth Option. BHP has four major projects under the development in Petroleum, Copper and Potash with a combined budget of US$7.5 billion over the life of the projects. BHP also expects that the Underlying EBIT in the December 2017 half year will include impairment charges which will be in a range of US$250 million to US$350 million. The group also highlighted the 3% rise in second-quarter iron ore production year over year which underpins the ability to meet its full-year target with prices outperforming forecasts.

With regards to Samarco update, BHP will support Renova Foundation financially by funding US$181 million till 30 June 2018. Out of $181 million, US$133 million will be offset against the Group’s provision that is created against the Samarco dam failure and US$6 million will be applied for the fees which is payable to experts who are appointed in connection with remediation and compensation programs. An amount of US$42 million will be made available to Samarco by providing it with a short-term facility.

Meanwhile, a preliminary assessment of implications of the US corporate tax reforms on the financials has led the group indicate higher profits. Further, the group now indicated petroleum expenditure of US$1.9 billion for 2018, which is lesser from its previous guidance of US$2.0 billion. It is also planning to exit from its onshore US assets for value which might be undertaken via a demerger or an IPO. If we look at the stock performance, the price rose by 26.15% in the past six months. While the prospects exist, volatility on iron ore prices also prevails. We recommend to “Hold” the stock at the current price of $30.79
 

Afterpay Touch Group Limited (ASX: APT)

Expansion opportunities: Post expansion of Afterpay in New Zealand, APT continues to investigate for its products in other markets but at the same time it is developing internal capabilities and resources to ensure innovation and growth in its established markets.  It also entered into a strategic relationship and into a new share issuance transaction with Matrix Partners which will enable APT to further investigate and execute a potential expansion into United States. APT does not expect Afterpay US to materially contribute to revenue soon and it will come-up with an update on its potential in US markets. On the other hand, the group has a strong underlying growth as the sales amounted to $551 million in Q2 FY18 against $367 million in Q1 FY18. Its customer base also increased to 1.5 million in Q2 FY18 over 1.1 million at the end of Q1 FY18. APT now expects consolidated revenue to be $60m and EBTDA in the range of $11-$12m for six months ending December 2017.The stock prices increased by all most 154.97% in the past six months and we recommend to “Hold” the stock at the current price of $7.76 


Merchants’ and Customers’ Base Trend (Source: Company Reports)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.