What's in the News, page-439

Latest UBS Research out....
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NEXTDC "In for the long haul, reassessing terminal value for DCF - Maintain ..."
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" Structural thematics intact and potential for acceleration in the medium-termWhile we are cognisant of the recent share price appreciation, we remain strong believers in the structural thematics of NXT. An accelerated shift to the cloud is, in our view, likely to play out over the next few years. We see upside from stronger uptake of contracted hyperscaler MW, which will then take time to activate – together with stronger growth within enterprise MWs, as businesses upgrade disaster recovery plans and shift internal DCs to colocation DCs. We see NXT as a core LT holding – Buy.Scenario analysis – assessing upside from an additional 80MWOur forecasts / valuation incorporate NXT's current planned capacity of 306MW, however we see scope (further out) for additional DCs (S4, S5, M4 etc.). Our scenario analysis suggests an 80MW DC would generate an additional $2.31/share (+16% DCF uplift / +20% vs current share price).NXT – still attractive vs peers once growth profile taken into accountWhile NXT's share price is up +52% over the past 5 months, we note recent major contract wins and the whole sector has rerated – with peers up on average +32%. The international peers are trading on a median FY22E EV/EBITDA of 21.2x, while offering 2yr EBITDA CAGR of 11%. This implies an EV/EBITDA to growth (similar to PEG) ratio of 2.0x (~1.5x pre COVID-19). NXT is now trading on a headline FY22E EV/EBITDA of 32.1x, with +28% CAGR – equating to an EV/EBITDA to growth ratio of 1.1x. If we exclude DCs with high capex investment, but not generating meaningful EBITDA in FY22E (M3/S3/P2), these drop to 27.3x and +21% respectively, while the EV/EBITDA to growth increases to 1.3x. Applying the pre COVID-19 international peer growth ratio of 1.5x to NXT implies a share price of $15.64 headline and $13.04 on the adjusted portfolio, while the current multiple of 2.0x implies $17.07 and $21.21 respectively.Valuation: Reassessing LT treatment - Buy, PT $14.15 (prev. $10.70)Historically, we valued NXT based on a finite 25 year life for each DC, plus ending land value and 40% salvage value. We have changed our DCF methodology to incorporate a terminal value and adjusted our DCF assumptions, taking into account those used by our US datacentre team. Key assumptions include: 1) WACC 6.8%, 2) Beta 0.85, 3) Cost of debt 6.0%; and 4) TGR 2.5%. Overall, our valuation increases to $14.15. "
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What a great stock to own! What a great aussie tech success story!