To those doing proper due diligence, here's a month old...

To those doing proper due diligence, here's a month old perspective from UBS (Oct 12)....
------
Evolving as the business enters a new phase of maturity - maintain Buy
In our view, the renegotiation of NXT's debt facilities not only further de-risks the DC roll-out strategy, but is also a positive indicator of NXT moving to the next stage of business maturity evolution. Channel checks suggest that industry conditions remain buoyant, and we remain believers in the thematics of NXT leveraging off the era of data generation and the shift to the cloud. Despite the recent re-rate over the last six months, NXT still screens attractive vs international peers, once taking growth into account – with a headline FY22E EV/EBITDA to 2yr EBITDA growth ratio of 1.3x, and adjusted ratio of 1.6x (exc. M3/S3/P2) trading well below international peers on 2.2x (refer fig. 2).


$1.5bn senior debt facility negotiated
NXT have advised that they have entered into a new Syndicated Facility Agreement for an underwritten A$1.5 billion senior debt facility. This will be split across three tranches (with 5-year tenors): 1) A$800m Term Loan Facility; 2) A$400m Capital Expenditure Facility; and 3) A$300m Revolving Credit Facility (multi-currency). NXT intends to use the Term Loan Facility to redeem A$800m in Unsecured Notes, on 9-Dec-20. Following this redemption, NXT will have pro-forma liquidity of ~A$1.6 billion, including A$893m of cash and undrawn debt of ~A$700m. This represents net incremental debt funding capacity of $400m vs the previous structure.


Debt refinancing – UBSe ~$11m interest saving + incorporating M2 20MW
Our preliminary analysis suggests an interest expense reduction of ~$11m p.a on a LFL comparison. The interest saving impact almost doubles EPS in FY22E (+86%), reduces FY23E EPS by -5% (impacted by end of tax losses) and increases FY24E EPS by +12%. We have also incorporated the additional 20MW expansion within M2, which starts increasing our medium-term EBITDA forecasts from FY25E (+$1m) before achieving full utilisation by FY29E (+$59m).


Valuation: Increasing PT to $15.25 (prev. $14.15) – maintain Buy
Our price target (PT) is based on our DCF valuation. Key assumptions: 1) WACC 6.8%, 2) Beta 0.85, 3) Cost of debt 5.75% (prev. 6.0%); and 4) TGR 2.5%.