Macquarie, UBS, Cadence tapped for Next DC raising

Next DC head Craig Scroggie in the firm's state-of-the-art B1 data storage facility in Brisbane. Picture: Richard Waugh

Macquarie Capital, UBS and Cadence advisory have been tapped for a $618m entitlement offer by $5.4bn data centre operator Next DC.

The raise is at $10.80 per share, a 8.3 per cent discount to close, after the stock closed on Wednesday at $11.78.

The funds will be used to pay for a Malaysia development, a data centre development in Auckland and the fit out of its data centre in Artarmon, Sydney.

The fully underwritten raising is by way of a one for eight entitlement offer with about $250m allocated for new data centre spending in Kuala Lumpur and $140m in Auckland and $150m to accelerate its S3 centre development at Artarmon after a contract win.

The remainder accounts for corporate costs and transaction costs.

“Whilst we are positive on S3 and its growth profile, we remain just as confident on Victoria securing a large contract (or contracts) over the medium term as a result of the attractiveness of market asset from corporate and enterprise clients,” said analysts from Wilson’s in research.

The analysts said that the group updated guidance by 2 per cent to the midpoint of revenue.

The underlying earnings before interest, tax, depreciation and amortisation range tightened, but there was no change to the midpoint of guidance.

The company made an adjustment of an eight per cent increase to the midpoint of capital spending, with the $50m increase to the midpoint being largely in line with about $54m that was spent of acquiring the land for its Kuala Lumpur data centre.

Meanwhile, E&P’s Paul Mason noted that NextDC’s capital raising is not as large as the last one in 2020 (it raised $675m for development), and dramatically de-gears its balance sheet.

“There is a relatively high short interest in the stock, so potentially purely for this sake the raising may end up seeing a positive share price reaction as it takes any questions about the balance sheet off the table,” he said.

Mr Mason said he didn’t think the company needed to raise equity, given the size and terms of its debt facility as well as its credit metric profile, but notes that it has a history of funding expansion projects with equity in the front end and debt in the back end.

“We would expect the raising to be taken up well by existing shareholders,” he added.

E&P has a Positive rating and $18.53 target price.

-Additional reporting by David Rogers.