NEXTDC pursues $1.3 billion capital raise for data center expansion

Company News

by Glenn Dyer

NEXTDC (ASX:NXT) is seeking $1.3 billion in a new capital raising to finance its growing data center pipeline and accelerate the expansion of its extensive data center networks in Sydney and Melbourne.

The company aims to raise $1.321 billion through a fully underwritten 1-for-6 pro-rata accelerated non-renounceable entitlement offer of new fully paid ordinary shares.

An accelerated issue will be offered to major shareholders, followed by a smaller retail offering.

The proposed issue price is $15.40 per share, representing a narrow 6.85% discount from Wednesday's closing price of $16.71.

Eligible shareholders are invited to subscribe for 1 new share for every 6 existing fully paid ordinary shares in NEXTDC held at 7:00 p.m. (Sydney time) on Monday, April 15, 2024.

Results of the institutional offer will be announced on April 15, with the trading halt lifted, and the retail entitlement offer set to open on April 18.

This capital raise exceeds the $618 million raised by the company in May of the previous year, indicating strong demand for data centers, particularly from cloud computing and AI companies.

This marks the second significant capital call from the market this week after Ansell's $400 million raise on Monday.

The capital raise will satisfy the strong appetite for NEXTDC shares, which have risen more than 21% year-to-date and over 50% in the past year.

The net proceeds from the Entitlement Offer will be utilized to accelerate the development and fit-out of NEXTDC’s digital infrastructure platform in its core Sydney and Melbourne markets to meet increasing customer demand and capitalize on ongoing market expansion.

NEXTDC reports record demand for its data center services, with a projected 71% jump in contracted capacity utilization.

The company anticipates a record forward order book translating into billings from FY25 to FY29, driving future revenue and earnings growth.

Following completion of the offering, NEXTDC will have pro-forma tangible asset backing of $5.1 billion and pro-forma liquidity of around $3.4 billion.

FY24 guidance reaffirms earlier 2023-24 earnings guidance, with net revenue projected in the range of $296 million to $304 million, underlying EBITDA in the range of $190 million to $200 million, and capex in the range of $850 million to $900 million.

CEO Craig Scroggie stated, "NEXTDC continues to see significant growth in demand for its data center services underpinned by powerful structural tailwinds." He added, "Amid this backdrop, we have decided to bring forward the development and fit-out 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."

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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