The prevailing winds are blowing favourably for data centre operator NextDC ((NXT)) as demand is robust and the company has a well-capitalised balance sheet. Several brokers believe FY18 will be pivotal as the company is well on its way to being materially larger, and generating attractive returns on capital.
Data centre operator NextDC (NXT) has been sold off sharply in recent months and the stock is now at a compelling entry point, brokers believe. They assert that the company’s position has been greatly misunderstood.
Data centre owner and operator NextDC (NXT) is being nimble, changing tack to capture the strengthening winds that are driving demand for data storage. The company was expected to deploy most of its cash balance in FY17 on the building of new data centres in Brisbane (B2) and Melbourne (M2). However, an existing international customer has purchased a further slice of the Sydney data centre (S1), pushing up contracted capacity to 82%.
NextDC has acquired a 14.1% blocking stake in data centre REIT Asia Pacific Data Centre ((AJD)) in order to head off an attempt by 360 Capital Group ((TGP)) to remove the AJD responsible entity to be replaced with its own. Next rents space from AJD.
As the market had suspected, NextDC will now expand to a second data centre in Sydney following the decision to build new centres in Brisbane (B2) and Melbourne (M2). S2 will be the company’s largest centre.