NXT - NEXTDC Limited

[peter2]

Interesting to read the past comments as I post the latest chart of NXT showing that price has gone from $7 to $12.50 inside nine months.
NXT hardly buckled during the COVID selloff (Mar 2020).

 

[galumay]

Amazing disconnected price action from what is basically a REIT.

 

[Dona Ferentes]

and Joe Aston giving them a serve

Seven months after data centre group NextDC spectacularly double-crossed some of its largest shareholders in a $672 million capital raising, those shareholders have delivered the board a salutary lesson. ...... major long-term investors were left dumbfounded in April when NextDC diluted them in the placement by as much as 25 per cent (the ASX’s temporary, COVID-19 limit for dilutive raisings). Chief executive Craig Scroggie, with all of the institutional market cognisance of a carroty dilettante, personally curated the stock allocations to “zero out hedge funds and others that were looking to profit off the trade”. Pro-rata be damned. And by dilettante, we really mean rank amateur. Scroggie diluted substantial shareholders Ellerston Capital and Macquarie Investment Management, neither of which are hedge funds, while handing a whopping haul to Greencape Capital, which sold its entire allocation the same week. He diluted Parametric and Dimensional Fund Advisors. Not even an investment bank’s receptionist would mistake them for short sellers. And that’s just a taste of the senseless inequity.

NextDC’s annual meeting is on Friday. On Tuesday, the company withdrew a resolution from the agenda seeking retrospective approval for the April capital raising. Shareholder approval would have the effect of resetting NextDC’s dilution limit under the ASX Listing. Put another way, the board wanted permission to dilute existing shareholders by an additional 15 per cent before April 2021 when they’d just finished diluting them by 25 per cent. Yeah, nah.
NextDC’s board “decided to withdraw Resolution 5 following feedback from some shareholders”, the withdrawal notice read. “The board acknowledges these views and would like to thank shareholders for their engagement on the matter.” A masterful turn in understatement.

And herein lies the most delicious part of Scroggie’s bungled “opportunity to really think deeply about the composition of the register” (deep thought not an endeavour he’s renowned for), as he put it in April. Under the Listing Rules, participants in the April raising are ineligible to vote on the AGM resolution to reset the dilution cap. By allocating all major shareholders even a measly handful of shares in the raising, Scroggie would have rendered them mute on this resolution. But the ginger maniac couldn’t help himself and gave a whole bunch of his owners zero. Rendering them the only shareholders with voting power on the resolution. And their engagement with the board on the matter is now concluded. It’s deadset fabulous...

NextDC board rolled by 'zeroed out' shareholders

Major NextDC shareholders have delivered the board a salutary lesson.

www.afr.com

 

[bk1]

NXT reporting half year results after market today. Data centre services revenue up 27%, Underlying EBITDA up 29%.
Strong growth in customers and interconnections.
Contracted utilisation at 80%..............But still not in profit.

 

[galumay]

Still an underperforming REIT!

 

[bk1]

NXT results, Revenue and EBITDA (u) both up over 20%, operating costs up by 16%, narrowed the profit and loss to $20M.
Continued expansion and increase in customers, but the market still doesn't like it.
Down over 4% currently.

 

[Dona Ferentes]

Another reporting today

... will leave it to others to consult... needless to say, Development Is Ongoing.
.
NEXTDC provides the following guidance for FY24:
 Total revenue in the range of A$400 million to A$415 million (FY23: A$362.4 million)
- Net revenue growth of 6% to 9% (FY23: A$279.4 million)
- Higher power passthrough revenues expected in 1HFY24 before moderating in 2HFY24
- Margins to expand from 2HFY24 as contracted price escalation flows through and power costs decrease
- The forward order book of 44.5MW6 (67.7MW on a pro forma basis) is projected to begin to convert into revenues by the end of FY24 and then ramp up over FY25-FY29
- Underlying EBITDA in the range of A$190 million to A$200 million (FY23: A$193.7 million)
- Step change in NEXTDC’s cost base ahead of material uplift in installed capacity (MW built) to reflect significant customer order wins in recent months
- Australian facility costs to increase in the range of A$12 to A$16 million, driven by increases in staffing levels as well as investments in landbank properties for future expansion
- Corporate costs to increase in the range of A$5 to A$7 million, with most of this investment going into Sales, Capital Works and Technology
- Operating leverage is projected to accelerate in line with the conversion of the forward order book to revenue from FY25

 Capital expenditure in the range of A$850 million to A$900 million (FY23: A$687 million)
- Expansion works at S3 Sydney to support customer orders, first tranche of S4 Sydney land due to settle in FY24 and S5 Sydney planning works underway
- Accelerated expansion for M2 Melbourne and M4 Melbourne planning works underway
- A1 Adelaide and D1 Darwin developments on track to achieve practical completion in 1HFY25
- PH1 Port Hedland and NE1 Newman on track – both having received first orders ahead of opening
- Commencement of construction at KL1 Kuala Lumpur and AK1 Auckland with both facilities expected to achieve practical completion in 1HFY26
- Additional capacity in plan at M2 Melbourne, M3 Melbourne, S3 Sydney, B2 Brisbane and P2 Perth in line with customer demand.

 

[galumay]

Always a tell and red flag when the Financial Highlights don't mention profit (loss), you know straight away that despite all the fluff and bullish*t earnings, they have made a significant loss. In this case the psuedo-REIT has made a loss of $25m. Not a good look on increased revenue! Massively negative FCF, business would actually be insolvent without the massive injection of debt and capital raising.

An absolute dog of a business and no amount of glossy photos and endless waffling with a few AI's thrown in can hide the reality.

 

[Dona Ferentes]

Appreciate your comments, G.

For me it seems to be permanently running, and hence likely to trip up, come a cropper, sometime soon.

 

[Dona Ferentes]

Amazing disconnected price action from what is basically a REIT.

and an insatiable thirst for capital

NextDC launches $1.32bn 1-for-6 entitlement offer at $15.40 per share

 

[peter2]

This is a HUGE cap raise.

I have a small parcel (x1000) of NXT and don't think it's worth my time to participate in the offer as I'm only entitled to 167 shares.

It'll be interesting to see what price NXT opens at when they resume trading. I'm anticipating a price much closer to the offer price than the TERP.

I'm surfing this DC (data centre) wave until it dumps me or peters out.

 

[galumay]

I guess the problem for a loss making REIT like NXT with massive debt already was its unlikely they can borrow much more so a cap raising is probably the only way to keep kicking the can down the road. Let the narrative speculation continue!

 

[peter2]

The speculative data centre narrative can continue for a little while longer and I'm happy to ride along.

With your wise words in mind I'll be aware of the next Q or HY report date.

Edit: I remember ABC Learning.

 

[qldfrog]

You know my feeling and kind of insider knowledge, I think the bigger the rot, the easier it is to suck people in:
Australia is missing its next enron "me think" ..but this time is different, we own RE: warehouse with AC....ROL..

 

[Dona Ferentes]

“We need power, we need transmission networks, we need green energy, we need more solar, we need more wind and, frankly, we need nuclear,” said Craig Scroggie, NextDC’s chief executive.
“We have to find net zero power options that are capable of supporting energy needs when the sun is not shining and the wind is not blowing and batteries [are] not going to cut it.”

 

[galumay]

The speculative data centre narrative can continue for a little while longer and I'm happy to ride along.

...and thats fine because you are trading price action, and you know what you are doing. The risk is much greater for those that consider themselves investors and rely on the narrative speculation without understanding the business fundamentals. Basically using the wrong data for the strategy.

 

[peter2]

First day of trading after the instos have filled up and the price is significantly down. Interesting.

I don't want to see NXT trading below the offer price (15.40). If it does and stays below this level at the expiry of the offer then my reasons for being in this trade evaporate. I'm considering buying a little more, just not sure when to do it, near the offer price or wait for a bullish demand bar?

 

[growthgauge]

I have put together two articles in last week about NextDc : NextDC thesis

 

[peter2]

@growthgauge NXT made a loss of 25.6M in FY23, not a profit as shown in your charts (your 1st NXT report).

And now they've lost another 22M in the 1H24.

It seems that NXT is growing the business while also growing the losses. Is there any possibility that they'll make a profit one day?

 

[qldfrog]

@growthgauge NXT made a loss of 25.6M in FY23, not a profit as shown in your charts (your 1st NXT report).

View attachment 174868
And now they've lost another 22M in the 1H24.

View attachment 174869

It seems that NXT is growing the business while also growing the losses. Is there any possibility that they'll make a profit one day?

Short answer: No
Any company profit opportunity can be transformed into management bonuses before the EOFY.. Why bother with dividends if your SP is not reflecting losses...