NextDC banks on $1.3bn raise to build computing future
Listed data centre developer NextDC says it needs at least $1.3bn to build out the digital needs of the future amid the nation’s AI boom.
NextDC says it needs at least $1.3bn to build out the digital needs of the future, and is seeking the new funds via a 1-for-6 entitlement offer of 85 million shares at a 7.8 per cent discount.
Trading in the $8bn listed data centre operator was halted on Thursday as it announced the capital raising plans, driven by a surge in demand for its centres. The company is offering 85,784,633 shares at $15.40. They last traded at $16.71.
Chief executive Craig Scroggie said demand was so great that NextDC had no choice but to expedite the development of two key data centres in Sydney and Melbourne.
“The digital infrastructure requirements for tomorrow to serve the computing needs of the future have to be built, they can’t be bought,” he said.
Analysts at Wilsons Advisory said the capital raising appeared to be proof of demand for NextDC’s services. “With data centres assets able to be highly geared, an equity raising of this size should position NextDC well to engage with its debt syndicate on upsizing its debt facilities,” they said.
E&P Capital analyst Paul Mason said the raise came as no surprise and NextDC should have no trouble hitting its target.
“We believe that the raising should be well taken up, and the event doesn’t materially change our view on the company or its valuation given we had already been incorporating something similar in our forecasts,” he said.
NextDC will also build an AI supercentre in Port Melbourne, turning the former Herald & Weekly Times Westgate Print Centre into a purpose-built AI data centre that would be home to hundreds of staff and include a network control centre for mining, traffic and other customers.
“That old printing factory will be turned into a world class state-of-the-art artificial intelligence factory,” Mr Scroggie said.
“M4 will be the next generation of facilities and it’ll be more than a billion-dollar investment in Port Melbourne.”
NextDC has forecast it will need to spend as much as $3.4bn over the next few years, including the $1.3bn from the raise. Of that, $862m is to support its broader development pipeline, $400m is to accelerate built capacity and $25m costs associated with its $1.3bn entitlement offer.
About $415m will go toward speeding up the development of its S3 data centre in Artarmon, Sydney, and $330m to the development of its M2 data centre in Tullamarine, Melbourne.
It will spend a further $350m on its S4 data centre in Sydney’s Horsley Park and $300m on S5, also in Sydney at Macquarie Park.
Demand for data centres has come in three waves: the first when corporates began to shut down in-house data centres and shift to third parties, the second when cloud computing grew, and the third, which has sparked the $1.3bn raise, is the emergence of AI and the computing power needed to run the technology.
“The key thing that has changed amid the AI wave and demand is just the density and the power requirements of those computers. The amount of compute capacity that we have today is having a big influence of the size and scale of the buildings we build,” Mr Scroggie said.
NextDC operates 13 data centres across Australia and has five under construction, including in Malaysia and Auckland. It has plans for six more.
The company has its sights set on Singapore, Japan and Thailand as its next targets, with previous reports suggesting a 13.76 billion Thai baht ($600m) data centre has received approval in Bangkok.
Mr Scroggie described NextDC’s business as one that builds hotels for computers, and in the past he has defended its losses as simply the cost of building an infrastructure business. Over the six months to December 31, it recorded a $22.5m loss.
NextDC shares are up more than 50 per cent over the past 12 months.
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