Hi Andre,Thanks for that, and just to be clear, I am always...

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woomp001

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11/01/24

22:35

Post #: 71840502
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Originally posted by Andredamus1: ↑

I am making an assumption that you are actually interested in the answer to your question (which may be a bit of a stretch).

The key point about NXT is that the majority of NXT's businesses (looking at each data centre as individual business units) are extremely immature (particularly when analysed in light of the amount of capital which has been invested in recent years ($1.2b across FY22 and FY23) on data centres which are generating very little revenue currently).

The best way to get a more accurate gauge of the value of NXT's businesses is to look at the fully mature data centres in the portfolio. If you look at M1 (which has a relatively tiny capacity of 15MW), the $266m of historical capital expended on land, buildings and fitout was fully recovered (from Facility EBITDA) in less than 7 years from the start of operations. The centre is currently generating in excess of $50m Facility EBITDA per annum at a return on assets of ~20% pa. I haven't come across a local cafe that can generate even a fraction of that. M2 will be 100MW when mature, M3 150MW and S3 80MW. What will the steady state EBITDA of those facilities be - based on M1, you are looking at Facility EBITDA of in excess of $1b per annum. Then you have S4 which has a planned capacity of ~300MW+.....

I also agree that NXT looks very expensive based on backward looking metrics, but IMO, it has one of the strongest long term growth runways of any large cap company on the ASX.

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Hi Andre,

Thanks for that, and just to be clear, I am always interested in meaningful discourse!

When I get some more time, I will dive into the depreciation piece more deeply.. so much really swings on that..

I will make a few quick points however..

Equinox paid 20 times Metronode revenues for it in 2018, so maybe 20 times revenues is defensible?!?

But no one has come back with why Equinox has a MC of only circa 10x's revenue vs nxt at over 20...

Another point for the bulls is perhaps they will actually make good money from the value of their dirt/land/buildings in prime city locations going up ever year... with soooo much capital tied up here, this could be a huge swing factor..

But back to the bear case.. does everyone here think nxt is like the only data centre provider in the world??

Why would one think that nxt can do it better than Amazon's aws? Or Microsoft? Or telstra? Or Vocus? Or Equinox??

Does NXT have a durable competitive advantage over these other market participants?

Maybe they do! But I'm nervous about the debt/interest/ongoing epic spend and how that lies with such a lofty valuation.. EV is now nudging 8.5B right!

NXT Price at posting: $13.89 Sentiment: Sell Disclosure: Not Held
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0 Great analysis

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