NXT Details
 
Update at S2 Facility: NEXTDC Limited (ASX: NXT) has been experiencing significant interest in its new Sydney S2 facility and has already received orders for more than 5MW of capacity while the facility is still under development and is expected to open in 1HFY19 with an initial capacity of 6MW. The group has earmarked revenue recognition for these commitments to commence in 1HFY19 and ramp up to full billing over the following 30 months. The group is progressing on its negotiations for large customer opportunities in order to have an increase in the Company’s contracted utilisation base. NXT also expects to expedite the development of an additional 4MW of capacity into FY19, which would enhance the total built capacity to 10MW at the site.

With regards to its new M2 Melbourne data centre, the group received Tier IV Certification of Constructed Facility (TCCF) from the Uptime Institute, the world’s leading independent data centre advisory and certification organisation, in December 2017. M2 is the second Australian data centre – and the second Asia Pacific colocation datacentre – to receive TCCF after NEXTDC’s B2 Brisbane facility.  The group received the Uptime Institute Tier IV Certification of Constructed Facility for NEXTDC Brisbane B2 in October 2017 and intends to seek the same for Sydney S2.

On the debacle related to winding-up of Asia Pacific Data Centre Trust, NXT has commenced despatch of its Meeting Booklet to APDC Trust members following the recent receipt of APDC’s register of members. Earlier, the group announced that it had not received any first right of refusal notice in relation to the portfolio of APDC data centres, in contrary to what was disclosed by APDC on the $300 million asking price assigned to the portfolio. The whole thing started with the concerns on $100 million debt facility that 360 Capital Group (ASX: TGP) tried to seek on behalf of Asia Pacific Data Centres (APDC) from Bankwest and National Australian Bank (NAB), which was thought to be detrimental to shareholders’ interests.

Strong results while cost challenges are expected to crop-up in FY18: The group’s FY17 results were healthy with strong growth witnessed across all key metrics, with a 33% increase in revenue to over $123 million, a 77% increase in EBITDA to $49m, and a more than doubling of operating cashflow. The contracted utilisation increased by 5.4MW to over 30MW. In FY18, the group expects revenues in the range of $146 million to $154 million, a growth of 18% to 25% over FY17, from $123.6 million achieved in FY17 and EBITDA rise from $49 million in FY17 to the range of $56 million to $61 million in FY18, based on expected new customer contracts. However, rising energy prices and operating cost increases from the opening of the new data centres have been indicated to increase the capital expenditure to be between $220 million to $240 million.
 

Growth in customers and connectivity (Source: Company Reports)
 
While many big players eye NXT for enhanced interests or as a takeover target, the current scenario with some market correction seen in conjunction with high trading levels of NXT and many positive catalysts factored into the stock price portrays for a profit booking opportunity. The stock has been up 44.68% in last six months as at February 05, 2018 and fell 5.1% on February 06, 2018. We give a “Sell” recommendation at the current price of $5.81
 

NXT Daily Chart (Source: Thomson Reuters)

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