Ann: Trading Halt, page-7

Just to provide everyone clarity around the capital raise because there seems to be a bit of uncertainty around why it was done.

Initially, the IPO raised sufficient funds to build out the two data centres to a power capacity of 0.5 MW.  However the TIER-Ready certifications received would only result in an actual TIER III or TIER IV certification being awarded if DXN built data centre blocks with an approximate power capacity of 1MW.  In other words, if DXN pursued a 0.5 MW initial build out of each data centre they would not have received a TIER III or TIER IV certification for their data centres despite having the TIER-Ready approvals.  This may have been lightly touched upon during the investor call when the capital raise was being undertaken.

From an earnings standpoint, as alluded to by my another hotcopper user, this will mean that DXN will have the capacity to generate up to $8m in revenue and earn ~65% EBITDA margin on that.

With the present trading halt in place which was preceded by the SPP extension, it is most likely that a positive announcement regarding sales will be announced.  It has also been encouraging to see that DXN have made the following video which (a) clarifies the benefits of DXN's offering (b) highlights that they can connect to the main cloud providers (i.e. Azura, AWS) just like the major data centres such as NextDC (c) provide new footage of the modules being located within the Sydney location.  However, there's definitely a worst case scenario that exists which might include further delay in data centre go-live date which will in turn require further equity raisings at already depressed prices.  Hopefully, it is the former and not the later which will be announced.

Link to video: 


The timing of the SPP close date is also interesting because after looking at other SPPs, there does not appear to hard and fast rule about closing SPPs one month after opening.  Some companies have closed SPPs within a week and others in three weeks.  So suffice it to say, DXN were probably aware of the depressed prices but were already working on a contract that would lift the share price (if announced).  Unfortunately, like any business contract, they take longer than expected to agree the terms for so hopefully the SPP extension will provide sufficient time for the market to digest the hopefully positive announcement resulting in an oversubscribed SPP by the end of next week.

I think it's also important to note that DXN is already on the radar for major financial institutions in Australia.  Macquarie and SG Hiscock, as substantial institutional shareholders, appear to be clear believers in the long term value of a data centre business.  Similarly ANZ believes in the business model because a commercial bank would be hard pressed to provide a loan to a company currently burning through cash if they did not have a strong belief in the company's ability to generate cash flow in the future (even despite all the collateral that has been put up).  So it is likely that this company is already on the radar for other institutions (hopefully IFM is one of them as they have dabbled in other microcap/smallcap stocks such as WHA, BDA, PFP [which happens to be another infrastructure-like play], so DXN would fall perfectly in their purview of core-plus infrastructure and micro cap).

All things considered, the next few weeks should hopefully be very exciting for long term holders.  And once DXN has proven their concept, they can quite quickly expand their company as the business model is naturally a cash cow.

Edit:  Check out this broker research company for reports on DXN (https://raasgroup.com/).  You need to register for free before downloading them.