The Nextdc Ltd (ASX: NXT) share price is under the spotlight after the business announced two new data centre developments.
Nextdc is one of the largest data centre-as-a-service providers in south-east Asia. It says it’s building the infrastructure platform for the digital economy, delivering the power, security and connectivity for global cloud providers, enterprise and government.
International expansion plans
It is expanding into Kuala Lumpur, Malaysia (with a data centre called KL1) and Auckland, New Zealand (AK1).
Nextdc said it’s going to fund these two developments, as well accelerating a fit out at S3 (Sydney), with a capital raising for $618 million.
KL1 is located around 10km from the Kuala Lumpur CBD, with total power planned of 65MW.
AK1 is located in the Auckland CBD, with total power planned of at least 10MW.
Both of these new sites are expected to reach practical completion of the phase 1 build in the first half of FY26.
S3 accelerated fit out
Nextdc has benefited from recent contract wins, increasing the contracted utilisation by 43%, or 35.9MW, to 120 MW. Due to these wins, S3 has now achieved contracted utilisation equivalent to 46% of total planned capacity, with the overall contracted utilisation “significantly exceeding” the facility’s built capacity.
To meet that demand, the business’ decision to accelerate its plans will seek to ensure that it can meet customer obligations and “continues to be best positioned for future growth.”
Capital raising
The capital raising comprises a 1 for 8 pro-rata accelerated non-renounceable entitlement offer.
This offer is being priced at a Nextdc share price of $10.80 per new share, which represents an 8.3% discount to the last closing price.
It will invest A$250 million in the development of KL1, A$140 million to develop AK1 and A$150 million on accelerating the fit out of S3.
Upgraded FY23 guidance
Nextdc has increased its FY23 data centre services revenue to a range of A$350 million to A$360 million, up from A$340 million to A$355 million.
Underlying EBITDA (EBITDA explained) is now guided to be between A$192 million and A$196 million – the guidance has been tightened from a range of between A$190 million to A$198 million.
Capital expenditure is in the range of A$670 million to A$720 million, up from A$620 million to A$670 million. That has been updated to include the recently-acquired land for KL1 of around A$53 million.
Final thoughts on the Nextdc share price
Nextdc shares have gone up significantly over the past six months (around 28%), so it’s a good time to raise capital. The business is seeing a lot of growth with the strong demand for cloud services.
But, I’m not sure how strong the company’s competitive advantages are and what its future profitability will be. So, it’s an interesting business but not one I’m looking to invest in. There are other ASX growth shares I’d rather pick.
