Last week, NEXTDC closed its $100m ‘Notes II’ offer and has today announced a fully underwritten equity raising of $120m. The Notes II offer presents good value and is expected to commence trading in December
The Notes II offer has the same structure and maturity date as Notes I raised in June 2014 and will rank pari passu with those securities. Key features of the Notes are detailed below:
Source: Company report
Capital raising key points:
- The equity raising and Notes II offer proceeds together with cash reserves, undrawn secured debt facility and ongoing operating cashflow is expected to provide NEXTDC with adequate funds to complete the initial investment in new facilities and fund the capital requirements of the potential new large customers
- The Company’s existing facilities in Brisbane (B1) and Melbourne (M1) are now reaching capacity. B1 contract utilisation reached 90% at 31 October 2015 (an increase from 79% in 30 June 2015) and M1 contract utilisation reached 77% at 31 October 2015 (an increase from 76% in 30 June 2015)
- The Company intends to develop two new data centre sites in Brisbane (B2) and Melbourne (M2). B2 is expected to have an initial capacity of 1MW+ with a target total capacity of approximately 6MW. M2 is expected to have an initial capacity of 2MW+ with a target total capacity of approximately 25MW
- The initial investment in the New Facilities is expected to be $175 million to $200 million over the next 12 to 18 months
- The Company expects to commission both facilities in the second half of the 2017 financial year
- NEXTDC intends to acquire the land and buildings associated with the new facilities and to continue to hold the underlying property once each facility is developed. The Company’s intention to hold the property is driven by the desire to have greater control over its long term assets and improve its operating leverage. Holding the assets will also enable access to more flexible longer term debt funding arrangements, which ultimately is expected to lower NEXTDC’s cost of capital
- The Company is also in ‘advanced’ discussions to win further large customer which if successful, would require a further $40m to $50m of capital expenditure in FY16
FY16 guidance
The following table summarises key financial information for the group including FY16 guidance.
| $m | FY13 | FY14 | FY15 | FY16 guidance |
|
Revenue
|
36,179
|
48,295
|
60,880
|
85,000-90,000
|
|
EBITDA
|
(20,000)
|
(16,100)
|
8,000
|
25,000-28,000
|
|
Interest
expense |
(600)
|
(1,200)
|
(6,300)
|
-
|
|
Capex
|
(64,440)
|
(103,362)
|
(22,961)
|
(75,000)-(85,000)
|
|
Equity
|
196,388
|
223,575
|
214,900
|
-
|
|
Total debt
|
7,341
|
66,079
|
66,737
|
-
|
|
Net debt
|
(31,542)
|
49,241
|
13,856
|
-
|
|
Undrawn facilities
|
-
|
20,000
|
50,000
|
-
|
|
EBITDA/Interest
|
n.m
|
n.m
|
1.27x
|
-
|
|
EBITDA-Capex/Interest
|
n.m
|
n.m
|
-2.37x
|
-
|
|
Net Debt/EBITDA
|
n.m
|
n.m
|
1.73x
|
-
|
|
Gearing
|
3.7%
|
29.6%
|
31.1%
|
-
|
NEXTDC has confirmed it remains on track to achieve its FY16 revenue guidance of $85m to $90m and EBITDA of $25m to $28m, with a skew towards second half earnings performance in line with the likely delivery and billing commencement of the new Leading Corporation and Federal Government customer contracts announced in June and August 2015.
Conclusion
NEXTDC continues to experience strong growth and win major contracts, proving the viability of this relatively new group’s business model (established 2010). The group has a strong balance sheet with moderate gearing of 31.1% and minimal net debt of only $13.8m in FY15. The Notes II offer presents good relative value with a 8.25% total coupon (albeit 1.25% is not paid until redemption).
For full information on NEXTDC please refer to the research report.