Some interesting observations recently.

At 31st December 2022 ---> NextDC contracted Utilisation was 84.2MW ( It took 10 years for NextDC to sell 84.2MW)

From 31st December to 12th April ( NextDC sold another 35.9MW in 4 months, Remember it took 10 years to sell 84.2MW)

From 12th April to 23rd August ( NextDC sold another 25MW in 4.5 months)

What has changed? in just 8 months, NextDC almost sold 61MW capacity.

The following article resonates with me. Have a read

https://venturebeat.com/data-infrastructure/how-new-ai-demands-are-fueling-the-data-center-industry-in-the-post-cloud-era/

NEXTDC Limited (ASX: NXT), Australia’s leading data-centre-as-a-Service provider announces its appointment by the Digital Transformation Agency (DTA) as a panellist on the Data Centre Facilities Supply Panel Contract (DTA-ICT-29247). NEXTDC are among the first category of panellists to be appointed, where panel arrangements have come into effect on 15^th May 2023.

https://www-nextdc-com.cdn.ampproject.org/c/s/www.nextdc.com/news/appointment-dta-data-centre-facility-supply-panel?hs_amp=true

NextDC reported it that the company's contracted utilisation has increased by 35.9MW to 120MW since 31 December 2022. That is massive number for half year and explains that they must have been chasing this big customer win since last 2 years.

To compare the scale of this number have a look at this graph

Now, Amazon have said that it plans to invest in its AWS business in Sydney and Melbourne from 2023 and 2027

https://www.manmonthly.com.au/aws-invest-13-2-billion-australian-cloud-infrastructure/

So you can guess who the customer may be. ( its just a speculation on my part )

This is going to be short squeeze in my opinion

Let's see what happens in the next few weeks.

Mega trends

Macroeconomics conditions

Move to Cloud has just begun

Data

SC1 is live and ready to welcome customers

S3 is open now

M3 is close to complete now

US Hyperscalers have reported mouthwatering growth in Cloud business and the growth forecast for cloud computing isn't slowing anytime soon. that bodes well for NextDC.

Few questions - is NextDC in a position to pass on inflation to these hyperscalers or suffering margin squeezed? Is there any signed contract NextDC holds for all these new capacities it is about to open for customers? Has overseas expansion on the card? What's the plan for going free cash flow and future investment?

NextDC is a data center services company. There is definitely a tailwind for its services. All Cloud migration, business digital transformation, and abundant data that everyone generates need home.

There is a number of players already exist in the market e.g. Equinix, Airtrunk, Rackspace, MAcquire Telecom etc

NextDC is well placed and ahead in the Australian market compare to other providers - It's financial is sorted - last November it renewed its debt facility.

If you ignore new investments, NextDC is already cash-flow positive at the operation level. The following graph illustrates how much operating cash it generated from FY2015.

Currently, NextDC has 98 MW capacity and current investment is to increase its capacity 4 times i.e 400 MW

Each 1 MW currently generates 4m in revenue.

The following two case studies were done during the FY21 presentation, which illustrates How a single DC generates ~75% EBITDA at a mature stage.

Now Do you think that there will be enough demand for data centers in the next 5 to 10 years? Wou7ld NextDC be able to capture that demand? Would NextDC will be able to fully utilize it's 400 MW capacity in the future? If answers to these questions are yes or highly likely then NextDC is too cheap currently - as at that stage it will be gushing cash like a machine.