Spotlight on data centres as demand surges: A Glance at DXN, NXT

Spotlight on data centres as demand surges: A Glance at DXN, NXT

Summary

  • A new business environment has lately emerged in the wake of COVID-19, which is likely to boost the cloud services and digitisation along with the new ways of remote working.
  • Companies’ revamped digital infrastructure is followed by machine learning, the next wave of internet. Also, demand for data centres is booming with low-latency connectivity.
  • DXN’s revenue has risen more than three times through its customer receipts during Q3 FY’20.
  • NXT has raised capital to boost its growth momentum, as well as presented a positive outlook for the future.

Nowadays, businesses are becoming data-hungry, which is further increasing the demand for information. Internet service is a utility and plays a massive role in our professional and personal lives. Thus, the substantial demand for real-time data transmission is at an all-time high.

As numerous firms are shifting towards digital transformation, the method in which day to day business is managed falls under increased surveillance.

Pandemic has seen the evolution of the business environment, while advancing the demand for digitisation and cloud services as the organisations are exploring methods to keep themselves dynamic and functional in times of lockdown and adopt new ways of working remotely.

Technology in the form of data centres is coming at the front foot to help businesses adapt to the growing pace of cloud services, digital disruption and machine learning that rely on factors like lower latency connectivity.

But what are these data centres? What do they do? What are its responsibilities?

Let’s dive in to get answers to all these questions.                                                             

A data centre is an integrated facility where shared IT computation facilities and network equipment are located. They are built for various purposes such as collection, storage, processing, and distributing data and applications.

Data centres are vital for any organisation’s continuity as they house data backup, recovery and networking. Hence, the security and reliability of data centres are amongst the top priority of any organisation.

Most of the modern data centre infrastructures have evolved from on-premises physical servers/physical infrastructures to virtual infrastructure that supports various applications and workloads across multi-cloud environments.

Role of Data Centre

Data centres constitute an essential part of an enterprise which is designed to support business applications and provide various services:

  • Data collection, storage, management, distribution, backup and recovery
  • Productivity applications, such as host websites, emails, instant messaging services
  • e-commerce transactions and cloud storage applications
  • Powering of various online gaming communities
  • Big data, machine learning and AI

Businesses and Government build their own data centre if they have the resources or access someone else’s. There are numerous options available such as renting servers at a colocation facility, using third party data centre services, or using public cloud-based services from hosts such as Amazon, Microsoft and Google.

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DXN Limited (ASX:DXN)

An Australian domiciled company DXN owns, designs, builds and operates data centres, with a modular approach. 

On 19 May 2020, DXN’s acquisition of the assets of Data Centre 3 Pty Ltd (D3) was completed for a total amount of AU$ 2.7 million in cash. D3 is a data centre located in Hobart Tasmania.

DXN had launched a re-priced entitlement offer on 8 April 2020 to fund the acquisition of Data Centre in Hobart. The offer will let shareholders buy 13 new shares for every 10 already subscribed shares at an issue price of one cent each to raise AU$5.9 million.

In late April, DXN announced its Q3 results ending 31 March 2020 and highlighted the impressive increase of 218% in its cash receipts from consumers, compared to prior period.

DXN has banked AU$ 2.1 million from customers by the end of 31 March 2020. Various contracts signed over 2020 period acted as a catalyst for the bolstered quarterly receipts.

Notably, DXN  this year, inked the following contracts with-

  • AGIG (Australian Gas and Infrastructure Group), in January. As per the contract worth AU$ 670k, DXN would be supplying a turnkey data centre solution to AGIG.
  • Synergy in January worth AU$ 75,000, which is a three-year maintenance contract.
  • Telecommunication Tokelau Corporation, or Teletok in March, for the deal valued at AU$714K to design, build and install three cable landing stations in the small island nation of Tokelau.
  • Business Communications Australasia (BCN) in February, for the duration of 3-years’ worth AU$260,000.

The quarterly contracts complemented a 39% reduction in employee costs, as well as 56% improvement in the net cash from operating activities during the March quarter.

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DXN had the cash resources of AU$1.46 million by 31 March 2020. Despite the economic uncertainty, DXN is expecting to earn from customer receipts between AU$3.4 million - AU$3.6 million over the next two quarters

DXN has sought government assistance to sail through the COVID-19 storm in the areas such as JobKeeper subsidy; a cash boost payment; payroll tax refund/deferral.

DXN’s share price stood at AU$0.019 on 12 June 2020, decreasing by 5% from its last close. DXN has a market cap of AU$21.01 million with ~1.05 billion outstanding shares.

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NEXTDC Limited (ASX:NXT)

NXT is a technology company, engaged in establishment, development and operating of data centres, providing colocation services to organisations globally.

On 1 June 2020, NEXTDC was recognised by Frost & Sullivan as the market leader in the Australian data centre industry for its committed innovation and sustainable operations, continuous R&D investments and effective strategic partnerships that bolster its growth momentum. 

Share Purchase Plan closure:

NXT completed its share purchase plan on 5 May 2020 and raised AU$191 million.

As notified to the market, on 5 May, NXT in total has raised AU$863 million, which consists of AU$672 million and AU$191 million via institutional placement and SPP, respectively. The proceeds from the capital raising would provide flexibility to the balance sheet, needed for acceleration and expansion of numerous growth initiatives aligning with recent and expected material customer contract wins.

Also, funds will assist the Company in sustaining its growth momentum that includes the commencement of Phase 1 of its Sydney-based new data centre development.

Do Read: NEXTDC Updates on its Customer Contract Wins        

On 1 May 2020, NXT announced that contracted commitments at its data centre facilities in Victoria rose by over 27 MW. The contracted customer commitments, along with expansion options at the Victorian data centres are ~60MW.

NXT decreased by 2.3% from its previous closing price, to settle at AU$8.92 per share, as on 12 June 2020.

 


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