Nextdc Limited (NXT)
HOLD

In-line is not enough

 29 Aug 2022
Sector: Information Technology

FY22 RESULT

Need to know:

  • In-line earnings result.
  • FY23 earnings guidance in-line with market expectations.
  • Lower share price given in-line result, flat earnings guidance, and slower-than-expected 2H22 contracted utilisation.

Investment implications

FY22 Result: In-line result. FY23 guidance is in-line with market. Higher CAPEX in FY22, guided lower in FY23 given the staging of various developments. Market underwhelmed; the share price has fallen ~7% since the result. 

Result Details: Revenue in-line $294m vs $291m market. EBITDA marginally ahead $169m vs $166m market. NPAT $9m vs $8.3m market.  No dividend as expected. Capex of ~$605m above the guidance range of $530m-$580m (A$558m market). FY23 earnings guidance is in-line with expectations and therefore unlikely to provide any material changes to consensus estimates.

Outlook: FY23 guidance in-line with expectations; revenue guidance A$340m to A$355m vs 349m market, underlying EBITDA guidance $190m to $198m vs $196m market. CAPEX guidance A$380m to A$420m vs market A$482m. FY22 CAPEX came in higher than expected (+$50m), which is explained away by timing (lower CAPEX in FY23).  

Slowing data centre capacity growth?  Contracted data centre (DC) utilisation was up 7.5MW last year however only 2MW of that came from 2H22. The market was looking for ~10MW. We note new client capacity can be lumpy given hyperscale deals. New DC S3 is open with 12MW of capacity, M2 in Melbourne has been upsized to 100MW (prior 40MW) of capacity.

Our view: An in-line earnings result leaves the market with the impression that demand growth is slowing for DC capacity. We expect minimum changes to FY23 earnings estimates. 

Whilst we acknowledge new capacity additions can be lumpy, the softer than expected numbers today will likely overhang these results in the short term. The trading update at the November AGM will be closely watched.

This commentary reflects our initial view. For detailed reports for companies under Sandstone Insights coverage, see our latest research notes for our investment view and specific risks associated with investing in these companies.

Stock overview

Share Price

Company overview

NEXTDC is a technology company engaged in the development and operation of data centres. The Company is focused on providing data centre outsourcing solutions, connectivity services, and infrastructure management software services.

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