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Data centre operator NEXTDC (ASX: NXT) has announced a mammoth $1.32 billion capital raising to fast-track the development and fitout of new facilities in Sydney and Melbourne amid record demand for the company’s data storage services.
The planned entitlement offer, priced at $15.40 per share, is twice the value of a $618 million raise completed almost a year ago for the development of new data centres in Malaysia and New Zealand.
NEXTDC’s plans for its Sydney and Melbourne operations include the development of two new data centres for Sydney, taking its footprint in NSW capital to five facilities, as well as capacity expansion for its S3 data centre in Sydney to 50MW and its M2 data centre in Melbourne to 60MW in line with contractual commitments to customers.
The capital works program comes on the heels of record demand for data storage by customers with NEXTDC revealing that contracted utilisation more than doubled from 64.8MW to 149MW over calendar 2023.
“NEXTDC continues to see significant growth in demand for its data centre services underpinned by powerful structural tailwinds,” says NEXTDC’s CEO Craig Scroggie.
“Amid this backdrop, we have decided to bring forward the development and fitout of key assets in Sydney and Melbourne to ensure we are able to meet this growth in demand, continue to support our customers, and ensure the company is well positioned to take advantage of the diverse range of opportunities expected to present over the medium term.”
The fully underwritten entitlement offer of one new share for every six shares held in NEXTDC will raise $1.321 billion for the Brisbane-based company, which was founded by tech entrepreneur Bevan Slattery in 2010.
The $15.40 issue price represents a 6.8 per cent discount to the TERP (theoretical ex-rights price) of $16.52. NEXTDC shares closed at $16.71 yesterday ahead of today’s capital raising announcement.
NEXTD says the company will have a pro-forma net tangible asset backing of $5.1 billion following the capital raise and pro-forma liquidity of $3.4 billion.
Today’s announcement was accompanied by NEXTDC affirming its earnings guidance for FY24. NEXTDC says it is on track for revenue between $400 million and $415 million and underlying EBITDA of between $190 million and $200 million.
NEXTDC delivered underlying EBITDA of $102 million in the first half of FY24, up 5 per cent from a year earlier, while revenue surged 31 per cent to $209.1 million.
Capital expenditure for the year has also been affirmed at $850 million to $900 million for FY24, with $643 million allocated for the current half year.
NEXTDC’s near-term capital expenditure program totals almost $1.9 billion with the company planning to draw on funds from the capital raise and existing liquidity to finance the program.
This includes $400 million for the expansion of the built capacity of the S3 data centre in Sydney, while the development of S4 and S5 in Sydney will comprise a $350 million and $300 million investment respectively.
NEXTDC is planning to spend $330 million on expanding capacity at the M2 data centre in Melbourne, while a further $500 million will be applied to land acquisition opportunities that the company has identified in the Asia-Pacific region.
In FY23, NEXTDC lifted capital expenditure by 14 per cent to $690.4 million with the spend including final building works at S3 Sydney and expansion works undertaken at M2 Melbourne.
During the year, new sites were secured for Sydney and Melbourne, with S5 Sydney providing future expansion at Macquarie Park and M4 Melbourne providing future expansion at Port Melbourne.
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