NXT (ASX) Another day another 52 week high

Originally posted by Mathava ↑

Hi RCR and NXT holders,

Before you read the below sections, please read my previous post on major contract wins. https://hotcopper.com.au/threads/major-contract-wins.4205503/?post_id=33253875#.W0i4-9Iza70

Majors Cloud Providers

Below I will outline where the top 4 Public Cloud providers (AWS, Microsoft Azure, Google Cloud Platform and IBM Cloud are located. The content can be gleaned from the following articles and websites [1] , [2], [3] and [4].

Amazon Web Services

ap-southeast-2a (Equinix SYD 3)

ap-southeast-2b (Global Switch West Sydney - North Ryde)

ap-southeast-2c (AWS own datacentres)

Eastern Creek (Sydney West)

Smeaton Grange (Sydney Southwest)

Microsoft Azure

Australian East - NEXT DC S1

Australian Southwest - NEXT DC M1

Australian Central - Canberra Datacentres

Australian Central 2 - Canberra Datacentres

Google Cloud Platform

AUSTRALIA-SOUTHEAST1

Equinix SY3

Equinix SY10

NEXT DC S1

IBM Cloud

Digital Reality Sydney Erskine Park

Digital Reality Melbourne Deer Park

Major Contracts - GOOGLE

In the FY18 H1 results NEXTDC announced a 5MW contract in S2. If we look at the above major customers that are likely to consume it would be Microsoft or Google, as they are existing customers. I don’t believe it is AWS or IBM as they seem to have spare capacity at the facilities they are located at (Equinix, Global Switch and Digital Reality).

I believe the 5MW at S2 is going to be consumed by Google and is part of a larger partnership between Google and NEXTDC. I say that for the three following reasons.

Goggle Cloud Dedicated Interconnect and AXON network

Most of you would have seen the articles over the last week confirming NextDC is one of only two organisations that provided 'Dedicated Interconnects' to Google Cloud Platform. The two organisations being NextDC and Equinix and that is because Google Cloud Platform is located in NextDC S1 and Equinix SY3. We know this by looking at the Cloud On Ramps for Google in Australia on the Cloud Scene website [4]. This reinforces that there is an existing relationship between Google and NextDC in place.

The second part of the announcement was that all of NextDC's datacentres will be able to connect to Google Cloud Platform via NextDC AXON network. The AXON network gives Google the "Edge" capabilities to Google Cloud Customers. If you want to know what "Edge" capabilities are read my post on that topic https://hotcopper.com.au/threads/edge-data-centres.4267161/?post_id=33942132

Indigo Subsea Cables (Formerly APX-West and APX-Central)

In my previous major contacts post I talked about Sydney (S2) , Melbourne (M2) and Perth (P1) have significant growth.

It so happens that Google is part of the consortium (AARNet, Google, Indosat Ooredoo, Singtel, SubPartners, and Telstra) that is building the Indigo Subsea cable from Singapore - Indonesia - Perth - Sydney . SubPartners is owned by Superloop, which happens to be founded by Bevan Slatery.

We know that Next DC P1 is one of only 4 datacentres in Perth which will have a landing point for the subsea cables [6]. There are about 20 datacentres with landing points in Sydney which NextDC will be one of those.

I don’t think it is coincidental that Next DC contracted sales in Sydney (S2) and Perth (P1) and announcement of S3 and P2 are lining up with the locations of the subsea cable.

In fact Google Cloud Platform value proposition is based on their investments and connections to Asia via subsea cables. It has the largest network of any cloud provider [7].

Timing

Thirdly the timing of the Indigo Subsea cables and S2 contracted utilisation are all lining up for H2 2019.

Major Contracts - Microsoft

In my earlier major contracts post (33253875) I talked about there being a large contract in Melbourne that is circa 8-10MW. I believe this contract is likely to be with Microsoft. It could be with Google but given the above Sydney contract is only 5W, hard to see how Melbourne is going to be bigger.

We know that Microsoft has previously consumed 3.5MW in M1. Market announcement on ASX

29th June 2015 - 4MW (2MW S1 + 2MW M1)

25th Jan 2016 - 2MW (1MW S1 + 1MW M1)

Given the growth that Microsoft Azure is expiring, circa 93% year on year [8], wouldn’t surprise me Microsoft needs that kind of capacity.

Future
What is really important about these large contracts wins is the network effect. Azure and Microsoft customers will want to be closely connected to the system and for their hybrid cloud needs will then put their own servers into NextDC. NextDC having 2 of the 4 public cloud providers is a massive win.

As previously stated, I am firm believer that Craig S. is a conservative executive and the commentary coming from him will be backed up with major contacts announcement and significant growth for NextDC shareholders.

I continue to buy more NXT shares with purchases totalling 30,000 shares since the capital raising.

Disclosure

The above information of who the major customers are, is my educated opinion. I don’t know for sure but am quietly confident we will find out either in Aug 2018 on Feb 2019 with NextDC financial reporting.

References

[1] Amazon live from Sydney data centre next week https://www.itnews.com.au/news/amazon-live-from-sydney-data-centre-next-week-322410

[2] Amazon Web Services to build two Sydney data centres https://www.itnews.com.au/news/amazon-web-services-to-build-two-sydney-data-centres-396802

[3] AWS debuts new Sydney availability zone https://www.itnews.com.au/news/aws-debuts-new-sydney-availability-zone-415008

[4] Cloud Scene https://cloudscene.com/

[5] Indigo Submarine Cable Project Updates https://www.submarinenetworks.com/e...indigo/indigo-submarine-cable-project-updates

[6] Superloop unveils INDIGO integration plans http://www.capacitymedia.com/Article/3782500/Superloop-unveils-INDIGO-integration-plans

[7] GCP's Sydney Regions is now open https://youtu.be/a6fLCl_z2_o

[8] Microsoft Azure revenue grows 93 percent https://www.crn.com.au/news/microsoft-azure-revenue-grows-93-percent-489742

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Wow! Mate, great research and analysis. Agree with your assumptions and as a lth have no reason to doubt CS’s optimism. He hasn’t missed a beat yet. Agm could give us all another surprise. Gltah and I can’t wait til August 29

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