Company is doubling down on risk & growth. FNArena article...

Company is doubling down on risk & growth.

FNArena article appears to capture both sides of the arguement:

https://www.fnarena.com/index.php/2018/09/03/nextdc-needs-new-major-customers/

I still have the outside suspicion that Microsoft expanded in S1/M1, which is responsible for the large lumpy growth that we saw.

Looks like:

B2
Commenced Operations: Sep-17,
Initial Capacity (Built): 2.0MW
Current Capacity (Built): 2.0MW
FY18 Revenue Contribution: did $1.38M for the 9-10 months (Project + Data Centre Revenue) .
Contracted Utilisation: 0.3MW (Up from 0.2MW at FY18HY).

M2
Commenced Operations: Nov-17
Initial Capacity (Built): 2.0MW
Initial Capacity (Built): 5.0MW
FY18 Revenue Contribution: $1.76M for the ~7 months (Project + Data Centre Revenue).
Contracted Utilisation: 0.7MW (Up from 0.3MW at FY18HY).

Both of these opened with 2MW available. So neither are capacity constrained. I was really hoping to see these ones leap out of the gates.


Perth & ACT:
In hindsight Canberra & Perth have both been laggards, with Canberra still negative. Perth's starting to pickup but contracted utilisation is still only 2.2MW from a Maximum Design Capacity of 6MW after 4 years of operation (Commenced Operations Feb-14).

Now a P2 is on the cards? I'm not sure what the rush on P2 is? by all means secure land, do designs & planning, but don't waste valuable capital building.

The problem with Canberra is that it's primarily all Government Spending and it's all tied up by one provider Canberra Data Centre (CDC). They have total control of the Federal Government Spend and have been winning every new Government Contract.

It's the same value that Equinix saw in Metronode, with a complete tie-up of the NSW Government Spend.

Timing of P2 / S3 / M3.
I don't like the idea of them Developing S2/S3 & M2/M3 together as it just means greater capital intensity (~$120M per Centre), risk and higher OpEx, it will mean going back for further equity raisings and hence dilution.
Just do the design and planning for S3/M3 and defer them for as long as possible. By that time cashflow will have materially risen to partially self fund growth & expansion.


The other negative with this is you are likely to have people delay taking up space in P1/S2/M2 if they perceive P2/S3/M3 is just around the corner. Especially S2.
Please remove that doubt from investor's & customer minds.

I'd love to see them revisit increasing the Capacity at S2 & M2, if possible (crazy to think S2 was going to be 25MW).

Sydney Market
I'm very bullish on demand in Sydney, but that is now where the most supply has been going in.

NextDC S2 :30MW
NextDC S3: 80MW
Airtrunk Sydney: Now listed as 90+MW.
Global Switch Sydney East: ~30-35MW.
Equinix SY4: Unsure? 30MW?
Macquarie Telecom (Macquarie Park): 33MW.
Total: 293MW
That doesn't even include what all your Digital Realty's, Fujitsu, HP's, etc. are doing.
Will very quickly make S1 at 16MW suddenly seem like a minnow.

Interestingly rumours have linked Google as taking up capacity with Macquarie Telecom. I believe someone had linked them to NextDC?
https://www.copyright link/street-t...cquarie-telecoms-new-customer-20180829-h14nz9

A big concern for me is major expansion in the absence of commitments from customer's, it majorly ramps up risk again when the company was derisking.