Macquarie Technology raising $130m amid rapid rise of cloud and AI ‘megatrends’

Macquarie Technology Group (ASX: MAQ), backed by nine years year of underlying earnings growth, is raising $130 million to capitalise on what it describes as the rapid rise of cloud and artificial intelligence ‘megatrends’.

The data centre group, formerly known as Macquarie Telecom Group, plans to use the funds to tap into new opportunities for data centres amid the ‘next wave’ of demand for the facilities in Australia.

Macquarie Technology shares were placed in a trading halt ahead of today’s announcement that it plans to issue 2.22 million shares to institutional investors. The price is pitched at $58.50 a share, or a 7.6 per cent discount to the company’s last traded price of $63.29.

Macquarie Technology, which lists Domino’s Pizza Enterprises (ASX: DMP) among its clients, currently operates five data centres including two in Canberra that were built for federal government security.

The company is currently developing a major data centre campus in Sydney’s north with plans to continue adding to its network.

“This raise will strengthen our company and enable us to invest and expand our data centre business to capitalise on cloud and AI megatrends,” Macquarie Technology CEO David Tudehope says.

“As our economy becomes more digitised, organisations are moving their data and applications to the cloud at a faster pace.

“The cloud lives in new-generation data centres like ours supported by leading cloud services and cyber security platforms.

“AI is the next significant megatrend for data centres and the digital economy, driving higher power density and demand for greater capacity. As these two megatrends combine, we expect to see strong demand for the latest generation of data centres.”

Macquarie Technology says the $130 million capital raising will also ‘significantly increase liquidity and free float’ for the company.

The injection of fresh capital comes on the heels of a $618 million capital raising by Brisbane-based data centre operator NEXTDC (ASX: NXT) in May with those funds to be used for development of data centres in Malaysia and New Zealand.

The international expansion comes on the heels of a massive development program under way in Australia that will build on NEXTDC’s existing network of 12 data centres.

NEXTDC’s CEO Craig Scroggie has previously told Business News Australia that the increasing scale of the company’s centres was essential to meet an explosion in demand for data storage.

“The estimate is that every 18 to 24 months the amount of data that exists in the universe doubles; so, every couple of years the amount of information will be twice as much as we have today,” Scroggie said in an interview last October.

While Macquarie Technology’s non-underwritten institutional placement will support its data centre business in the ‘next phase of growth’, the company has not indicated any further expansion of its network beyond its current project in Sydney.

Macquarie Technology today also reaffirmed its FY23 EBITDA guidance of between $102 million and $104 million. This is up from $88.4 million in FY22 and will mark the ninth consecutive year of EBITDA growth for the group since FY15.

The date centre business will contribute EBITDA of between $32 million and $33 million in FY23, with the balance from its telecom and its cloud services and government divisions.

Macquarie Technology notes that it operates a high-quality revenue model with more than 60 per cent of its billings generated from top 20 customers that are AA+ rated or better.