Further to my earlier comments about future earnings, I draw your attention to a report Gary Rollo from Montgomery's, put out 18 Oct 2019. Gary seems to have a very good understanding of NXT's potential, and his projections are playing out. Part of it is pasted below. Remember, all this was put forward 18 months ago:
------------------------------------------------------- How we value NXT
Our valuation view of NXT reflects its long-term asset nature, and is cashflow based on what we believe is a conservative set of assumptions. We include the development of S3 in our valuation. We apply a Cost of Equity (CoE) that reflects the risks associated with development phase of the asset in the early years – 12 per cent, declining to 7 per cent when the model assumes NXT stops developing and starts to harvest the cashflows from its asset pool. NXT at that point looks a lot like a REIT, with cashflows steadily slowly growing from low price and cost inflation assumptions much like the rental income profile from a long WALE office tower in a CDB location, except the tenants are the digital infrastructure and data that powers the cloud. On that basis we value NXT at $13 a share. Being a long-term asset NXT’s valuation is very sensitive to that long-term cost of equity assumption. By way of benchmark the small cap REIT universe is currently yielding somewhere between 5-6 per cent. If the market’s view of long term interest rates continues to be low then NXT is a likely valuation beneficiary as the table illustrates.
(Open attached pdf file - apologies, I could not get the table to transfer in the copied file)
Source: Montgomery
Today NXT shares trade at $6.40, so there’s a lot of value on the table if you can take a long-term view and see through the earnings headwinds and perceived funding pressure.
We like NXT’s combination of exposure to strong growth themes, management with a proven track record of developing high quality assets and making good returns, the quality and duration of NXT’s assets and the scope for considerable valuation growth over time as indicated by our long-term valuation model.
We don’t expect NXT to re-rate to the $13 our value model suggests tomorrow, but see the upcoming completion of NXT’s S2 data centre project as a significant catalyst on the way.
In regard to the table linking share price valuation to cost of equity, NXT recently refinanced their borrowings from 5.6% to 3.2%. so Montgomery valuation moves substantially more than $13.08 to well over $20. Based on this value, and using the suggested earnings of around 5% for an REIT type investment, earnings under Montgomery's assumptions should reach around $1 share in say 5-10 years time. So earnings of 25cps in 3 years time is realistic, and they will continue to grow, and if growth ever slows down, there will be an excellent dividend stream.
NXT Price at posting:
$10.27 Sentiment: Hold Disclosure: Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(Open attached pdf file - apologies, I could not get the table to transfer in the copied file)
(20min delay)