Global Expansion for NextDC and Nearmap

  • Nov 18, 2019 AEDT
  • Team Kalkine
Global Expansion for NextDC and Nearmap
Global Expansion for NextDC and Nearmap

According to Australian Trade and Investment Commission,

“The Australian data centre services market is undergoing a period of significant growth, and the increase in global mobile data traffic is expected to continue to underpin the demand for data centre services in the future”

Several major infrastructure projects are currently underway in Australia that are expected to significantly influence the future development of the digital environment and cloud computing.

Born global companies like Canva, Atlassian, Safety Culture and Culture Amp are drawing benefits out of Australia’s active technology community that enables the associations among universities, research entities and the private sector, as well as research and development tax benefits.

In light of the above facts, we shall now discuss two information technology sector players listed on ASX and their potential for global expansion.

Nearmap Ltd (ASX: NEA)

Founded in Perth, Australia, Nearmap Ltd has progressed from a small online start-up to become a next-generation digital content leader providing other businesses with immediate access to high-resolution aerial imagery, city-scale 3D datasets, and integrated geospatial tools.

The technology-driven company NEA assists several industries including government, service contractors, architecture, construction, engineering, property & real estate etc. with its innovative location intelligence business capturing a rich data set about the real world and providing high-value insights.

Figure 1 Geographical Population Coverage (Source: Company's Report)

NEA was founded in 2007 and later laid the foundation for substantial growth in the US during FY15. Fast-forwarding to FY19; NEA’s – record portfolio growth is compelling for the business for the global opportunity.

NEA’s annualised contract value (ACV) increased by 36% during the year, representing an increase from $24.0 million to $90.2 million. Moreover, NEA’s accelerating North America’s business currently forms more than one-third of the total portfolio.

The Company CFO, Mr Andy Watt, commented:

“Nearmap’s portfolio growth in FY19 was achieved as we delivered on our guidance for the core business to be cash flow break-even excluding the deployment of the capital raise proceeds”

“The ongoing improvements in our unit economics delivered another strong year of ACV growth, and the capital raise in September last year has allowed us to accelerate our strategic objectives as we focus on the considerable global opportunity in front of us”

Dr Newman, Managing Director & CEO of Nearmap, believes:

“With our unique technology and business model which no other aerial imagery company has been able to replicate at scale, Nearmap continues to focus on the global opportunity to become the world’s leading provider of subscription-based location intelligence.”

Some of the compelling achievements of NEA during FY19 (year ended 30 June 2019) are as follows:

  • North America
    • 76% growth in ACV portfolio at 30 June 2019 of US$22.7m (30 June 2018 US$12.9m);
    • Subscriptions of 1,425 (FY18: 946), growth of 51%, with ARPS increasing 17% to US$15,918 (FY18: US$13,603);
    • STCR remains strong at 106% and includes a 20% increase in total sales and marketing costs vs prior year in support of growth opportunities.

Growth in Subscriptions Figure 2 Growth in Subscriptions (Source: Company's Report)

  • AUSTRALIA & NEW ZEALAND
  • 19% growth in ACV portfolio at 30 June 2019 of $57.9m (30 June 2018: $48.8m)
  • STCR of 106%, reflecting investment in customer experience and retention in FY19
  • Subscriptions of 8,375 (30 June 2018: 7,917)

Nearmap believes it is at an outstanding place to bring in another year of strong growth in FY20, with the consolidation of its market leadership in Australia and execution on the growing momentum in North America.

NEA stock was trading at a price of $2.835, down by 1.562%, as on 18 November 2019 (at AEST 1:09 PM).

Over the last year, NEA stock has provided 93.29% return.

Let us visit another information technology company eyeing global expansion.

NEXTDC Limited (ASX: NXT)

NEXTDC Limited is engaged in developing the infrastructure platform for the digital economy, with a view to providing the vital power, security and connectivity for global cloud computing providers, enterprise and government.

NEXTDC is a globally recognised company for:

  • It’s design,
  • construction and operation of Australia’s only network of Uptime Institute certified Tier IV facilities,
  • and the only data centre operator in the Southern Hemisphere to achieve Tier IV Gold certification for Operational Sustainability,

With a focus on sustainability and operational excellence through renewable energy sources and delivering world-class operational efficiency, NEXTDC’s data centres have been engineered to deliver exceptional levels of efficiency and the industry’s lowest Total Cost of Operation through NABERS 5-star energy efficiency.

NEXTDC arrived at some record figures in its operational and financial processes at the end of FY19 (ending 30 June 2019). During the year, NEXTDC increased its contracted utilisation from 40.2MW at the end of FY18 to 52.5MW, reflecting the continued expansion of the infrastructure platform at a rapid pace.

Talking about more compelling numbers; NEXTDC refinanced its $300 million syndicated senior debt facility (currently remains undrawn) during FY19 and is available for NXT to finance additional customer expansion.

NXT has been making constant investment and expansion of directly hosted cloud on-ramps to the world’s leading public clouds, only to bag the tag of “the most connected data centre provider” in the country.

Acknowledging NXT’s striking performance, the Company CEO said:

“Our company continues its rapid expansion, and we continue to invest in developing our people, our systems and our processes to take full advantage of these amazing opportunities”

NXT’s management is of the view that:

“Every 18 months, we create the equivalent total sum of data created since the beginning of mankind,

This information explosion is forecast to accelerate exponentially as a result of further advances in cloud computing, the Internet of Things, 5G and artificial intelligence to name a few,”

“We play a pivotal role in the new 4th industrial revolution, as we design, build and operate the critical infrastructure platform that will fuel the growth of the digital economy.”

Moreover, NXT is confident that demand for colocation data centre services will continue to boom, as network traffic within hyper-scale data centres is expected to quadruple by 2021 (as per predictions by analysts).

On 18 November 2019, NXT stock was trading at a price of $6.765, slipping by 2.381% (at AEST 1:20 PM), with a market capitalisation of $2.39bn.

Over the past five years, NXT stock has provided 229.00% return.

Bottomline

Information Technology sector has been a food for thought for investors as the industry has expansion and innovation potential to an unforeseeable extent. Witnessing the growth in data accelerate, analysts agree that we are at the standpoint awaiting the start of a “data tsunami” with the predictions that by 2022 there will be 50 billion smart connected devices, $40 billion spending in AI by 2020 and 220 million autonomous and connected vehicles by 2025.

The Australian Government is optimistic about making constant attempts to connect with all Australians to ensure they are forward-looking while being flexible and responsive to new opportunities and challenges that arise.

We are keeping our fingers crossed in an anticipation to witness the global expansion of these two IT players.


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