NextDC in a prime position after strong gains

NextDC is interested in the Asia Pacific arm of the $US10bn data centre business Global Switch.

The share price of data centre owner NextDC has been on a tear of late, up 58 per cent in the past year to take its value to $8.65bn.

Now questions are being asked about how it takes advantage of the strong gains.

Could an equity raising be on the cards?

Chief executive Craig Scroggie did not comment when asked by DataRoom about the prospects of a raising.

But market experts say that if there’s one thing they know about NextDC, it’s that the company is good at raising money at the right time, and its equity raisings are well received as well as well timed.

NextDC has been keen to buy the Asia Pacific arm of the $US10bn data centre business Global Switch since 2022, as reported at the time by this column, but most think an acquisition is not on the cards right now, because there’s too many challenges trying to establish what the owner wants, and the process to buy the business is opaque.

NextDC could always do with more funds for development and capital spending and its debt level is about 25 per cent, so it could pay that down.

Part of the reason why the stock has performed well is that few opportunities exist in the listed market to gain exposure to data centres as an asset class.

The only other major groups exposed to data centres is well-performed Goodman Group and the Global Data Investment Fund, another strong performer.

Data centres are appealing to buyers because of their defensive nature and have offered a stable, low-risk home for large pools of funds raised by private equity and superannuation funds.

Two years ago, UBS and JPMorgan were working on the sale of Global Switch.

Major deals in the global data centre space in recent years, include Kohlberg Kravis Roberts and Global Infrastructure Partners buying CryusOne, American Tower buying CoreSite, Digital Realty buying Interxion and DigitalBridge buying Switch in the US.