NXT - NEXTDC Limited

[System]

NEXTDC Limited (NXT) intends to develop the next generation of data centres focused on delivering smart, secure, scalable and energy efficient facilities to the Australian and New Zealand markets.

http://www.nextdc.com

 

[bazollie]

It will be interesting to see what NXT will do over the coming months. I was fortunate enough to get a small allocation for this float and also topped up on day one. A very impressive debut on the ASX and a very tight register.
Bevan Slattery has a fantastic track record in these types of businesses ( I.T. type )
Let's hope that he does the same for NXT that he and Stephen did for PWK!

Regards
bazollie

 

[deceit]

Anyone looking at these stocks? a quick post to probe some thoughts

Promising outlook ahead in my view.

They have just been approved for by the WA government to commence build on their first Perth datacentre: http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01258446

They commissioned their first datacentre (DC) in Brisbane in October, 4 more going live in 2012.

NextDC is focusing on energy efficient DC with good green credentials.
There is a huge hole in the Australian DC in this space as the increase in demand is not being satisfied at an appropriate rate.

They have major datacentre projects in most capital cities, inclusive of a ASIO-T4 rated secure DC in Canberra. Current Australian Govt IT reform calls for consolidation of some government computer systems in the 'cloud' utilising DCs such as the ones that NextDC will be commissioning.

....Bevan Slattery has a fantastic track record in these types of businesses ( I.T. type )
Let's hope that he does the same for NXT that he and Stephen did for PWK!

As mentioned above by bazollie, Bevan has a good record. PWK aka pipe networks had an amazing run before being bought out by TPG in 2010 for around $373 Mln

NextDCs Address to shareholders late last year: http://www.nextdc.com/attachments/article/32/4225k2nd40fggh.pdf

Unfortunately I missed the initial offering at $1/share and bought a parcel at $1.50 and another at $1.57.

 

[robusta]

Keeping a close eye on NXT and looking to buy on any sp weakness.

I do like that contracts will be inflation linked.

 

[ChrisJH]

Anyone watching this stock? It's jumped about 40 cents in the last week or two, wish I had of bought in when I started watching it; can't understand why it has gone up so much though.

 

[Stockspy]

Anyone watching this stock? It's jumped about 40 cents in the last week or two, wish I had of bought in when I started watching it; can't understand why it has gone up so much though.

Some discussion of government initiatives for cloud based business utilisation. May benefit Canberra D.C. Also announcement about structural completion of Sydney D.C. and it's projected late 13 completion may have kicked up s.p.

 

[Knobby22]

I have worked on designing infrastructure for data centres. I would worry that they may hire someone incompetent.

A data centre that does not have all the fail safes and can be trusted to operate are completely useless. It is a growing business but I would not be surprised if they mucked it up.

 

[kenny]

Excuse the Devil's Advocate approach.

I don't understand what NXT has as a point of difference to the established players such as Equinix.

http://www.equinix.com/locations/australia/australia-data-centers/

Also, what are the barriers to entry? I mean apart from stumping up the cash to build the centre and staff it?

I can see the need for secure external storage of ever increasing data volumes with a stable power supply. But how does NXT plan to take market share from the incumbents?

Cheers,

Kenny

 

[skc]

Also, what are the barriers to entry? I mean apart from stumping up the cash to build the centre and staff it?

I can see the need for secure external storage of ever increasing data volumes with a stable power supply. But how does NXT plan to take market share from the incumbents?

Cheers,

Kenny

NXT doesn't really need to take market share away from incumbents - as long as the market demand itself growing at faster rate than supply (i.e. new DCs being put up).

There's little barrier to entry. But there's probably also little incentive to change once you've picked your data center - provided that the service is up to scratch of course.

With investing in NXT you can quite easily work out a required return. The key variable is the growth aspect (and how they fund it). Spinning off centres and recycling capital in this space is a newish approach and will be interesting to see if it works out.

 

[kenny]

I agree it's a growing sector especially with the take up of cloud services in many businesses. Mobile app use will drive it too I guess.

I've only just started looking at NXT so have no idea about values yet. Any pointers to head me in the right direction would be appreciated. If following-the-management approach has merit, Bevan Slattery did well with PIPE and the early years for NXT before stepping back to focus on his new venture, SubPartners.

The Asia Pacific Data Centre spin off was well timed to attract yield chasers and as you say, skc, recycle much needed capital. An independent Australian provider of data centres may well appeal to certain customers.

 

[Country Lad]

An independent Australian provider of data centres may well appeal to certain customers.

And to investors. New customer $60 million revenue over 5 years and investor update resulted in a 13% share price jump.

A bit unexpected, I was ready to act on stop at $2.29

Cheers
Country Lad

 

[McCoy Pauley]

Darn it. I was looking to buy in at around the $2/share point but always put off my purchase. I do query whether this will be a good long-term investment though. It seems to be a very capital-intensive business, and unless NXT locks in its customers to long-term contracts, there seems to me to be a risk of low switching costs and therefore low barriers to entry.

 

[Country Lad]

It seems to be a very capital-intensive business, and unless NXT locks in its customers to long-term contracts, there seems to me to be a risk of low switching costs and therefore low barriers to entry.

I can't go along with that.

It doesn't matter who the competition is, the capital costs will be very similar, even if the prospective customer decides to have the facility in-house. So competitors are in the same boat but NXT at least has the cash for more capital expenditure.

Their target is large corporations which they are signing up for 4 or 5 year contracts plus options. For that customer to then switch at the end of the period will be no quick 'n easy task, disruptive and expensive, so as long as NXT meets customer expectations, there will be no reason to switch.

I like the business model.

Cheers
Country Lad

 

[tinhat]

And to investors. New customer $60 million revenue over 5 years and investor update resulted in a 13% share price jump.

A bit unexpected, I was ready to act on stop at $2.29

Cheers
Country Lad

View attachment 52712

I am always interested to see the patterns you mark up on your P&F charts. This stock has been on my watch list for a couple of years now but I've never pulled up a P&F chart for it.

 

[McCoy Pauley]

I can't go along with that.

It doesn't matter who the competition is, the capital costs will be very similar, even if the prospective customer decides to have the facility in-house. So competitors are in the same boat but NXT at least has the cash for more capital expenditure.

Their target is large corporations which they are signing up for 4 or 5 year contracts plus options. For that customer to then switch at the end of the period will be no quick 'n easy task, disruptive and expensive, so as long as NXT meets customer expectations, there will be no reason to switch.

I like the business model.

Cheers
Country Lad

Fair enough.

But having advised a number of clients in this field, I suggest that switching costs may not be as high as you think. Customers should be insisting on their service providers make it as easy as possible to extract their data to avoid problems of "vendor lock-in", and those service providers do that in most situations.

NXT is not the only provider of data center infrastructure in Australia, and I'd say that the market is becoming crowded with quite a few choices available.

I'd be watching carefully to monitor their utilization rates, if they make that available. There will be a point where it becomes profitable for NXT, and if the utilization rate drops below that point, then trouble will likely follow.

Only my opinion.

 

[Huskar]

But having advised a number of clients in this field, I suggest that switching costs may not be as high as you think. Customers should be insisting on their service providers make it as easy as possible to extract their data to avoid problems of "vendor lock-in", and those service providers do that in most situations.

NXT is not the only provider of data center infrastructure in Australia, and I'd say that the market is becoming crowded with quite a few choices available.

Always very interesting to hear someone's view who is close to the business.

Is Macquarie Telecom in the same market or do they have distinct points of difference - I have never quite been able to work it out. Who would NXT's other main competitors be?

And isn't Amazon Web Services going to blow all of them away in any case?..

 

[Ves]

NXT is not the only provider of data center infrastructure in Australia, and I'd say that the market is becoming crowded with quite a few choices available.

I believe there are a number of international entrants to this space in Australia with very deep pockets, indeed.

 

[McCoy Pauley]

Always very interesting to hear someone's view who is close to the business.

Is Macquarie Telecom in the same market or do they have distinct points of difference - I have never quite been able to work it out. Who would NXT's other main competitors be?

And isn't Amazon Web Services going to blow all of them away in any case?..

I believe there are a number of international entrants to this space in Australia with very deep pockets, indeed.

Microsoft also is getting into the game here in Australia some time in the future, but I believe that's only to support their clients that use SharePoint and Azure, not as a general data centre provider.

I've also heard that Amazon Web Services are making a decent splash into Australia. I also believe that Telstra is another company that's looking at this area of the market, to support its cloud computing applications.

There are some private operators that I'm aware of in Australia, including Interactive and Dimension Data, who offer the same or similar services to NXT. They might not be quite on the same scale as NXT, but they have a decent head start on NXT.

I wish NXT all the best, as I think that there is definitely space in the market for a well-run data centre provider, but I'm not sure that it'll have a big profit margin.

 

[Huskar]

Microsoft also is getting into the game here in Australia some time in the future, but I believe that's only to support their clients that use SharePoint and Azure, not as a general data centre provider.

I've also heard that Amazon Web Services are making a decent splash into Australia. I also believe that Telstra is another company that's looking at this area of the market, to support its cloud computing applications.

There are some private operators that I'm aware of in Australia, including Interactive and Dimension Data, who offer the same or similar services to NXT. They might not be quite on the same scale as NXT, but they have a decent head start on NXT.

I wish NXT all the best, as I think that there is definitely space in the market for a well-run data centre provider, but I'm not sure that it'll have a big profit margin.

Some interesting reading here on AWS and its potential impact:

http://www.itnews.com.au/News/326103,amazon-in-australia-the-industry-impact.aspx

 

[McCoy Pauley]

NXT announced this morning that its share purchase plan will be withdrawn due to volatility in the share price. It has pulled back almost 10% during the month of August from a high of $2.80/share to $2.42/share this morning.