NextDC Plans to Buy Asia Pacific Data Centre Group

Acquisition led to strong increase in price: NextDC Limited (ASX: NXT) has entered into an agreement which involves buying the REIT (real estate investment trust) named Asia Pacific Data Centre Group involving the consideration of $163 million, which is based on an offering of $2.00 a share of APDC securities (70.8 per cent) and a dividend of $0.02 per share. This will give NXT a 96.5 per cent stake in the property trust. Asia Pacific Data Centre is the owner of NextDC’s three data centres. The transaction has been entered after Asia Pacific Data Centre withdrew the NextDC’s data centres (S1, M1 and P1) from the market.


Revenue Trend (Source: Company Reports)

They decided to withdraw because they were unable to find the buyers and they have been trying this from the past 8 months. The stock price of NextDC witnessed the strong momentum on October 9, 2018 as it advanced 2.61%. The brokers have been bringing the stock in the lime light which helped the stock to witness strong momentum. The stock got fueled by the acquisition news.

What to Expect from NextDC Moving Forward?

The management of NextDC expects the company’s revenues to witness the growth in the range of 20-24% in FY 2019 on the YoY basis. The growth is expected to be witnessed on the back of long-term customer contracts. The company is also expected to see new customer wins which would further improve the growth prospects of the company. It is expected to record YoY growth in the range of 20-28% in the earnings before interest, tax, depreciation and amortization or EBITDA in FY 2019. The operational excellence would be helpful in witnessing efficiencies in respect of the purchasing as well as energy management.

NextDC also remains focused towards the deployment of funds towards improving the customers’ experience as well as growth projects. However, the company plans to incur capital expenditure or CapEx in the range of $430 million-$470 million in order to back the significant demand of the customers.

What does the Technical Analysis on NextDC suggest?

On the daily chart of NextDC Limited, MACD indicator has been applied by taking the default values in consideration. As per the observation, the MACD line is expected to cross the signal line and might move in the downward direction which represents bearish momentum. However, the stock has witnessed a substantial jump on October 09, 2018. We maintain our “Expensive” rating on the stock at the present market price of A$6.290 and wait for further updates given the cost factors and slowdown in sales growth as seen lately. 
 

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