Why the NEXTDC Share Price Is Up on Lower Profits

TPG–Vodafone Merger

Data centre operator NEXTDC Ltd [ASX:NXT] posted record results for the first half of FY18, including an upgrade to its FY18 guidance.

Revenue is up 32% from the prior corresponding period to $77.5 million.

Underlying EBITDA is up 41%, translating to a profit before tax of 54%.

Yet profit dropped 56% from 1H17 to $8.4 million.

What’s going on with NEXTDC share price?

At time of writing the company’s share price is up 16.612%, to $7.09.

The large profit after tax from the first half of FY17 included an income tax benefit of $11.3 million, which was seen as a one-off increase in profit after tax.

Hence, after adjusting for this one-off payment, the company has grown its profit after tax.

On the results, CEO Craig Scroggie said:

We are very pleased to report another period of record performance. These results clearly demonstrate the Company’s inherent operating leverage and further showcase continued strong growth with significant increases in contracted utilisation. The first half’s performance also included a record period for project revenues and a record period for new interconnections.

Full-year guidance has been upgraded.

The initial underlying revenue guidance was $146–154 million, and has been upgraded to $152–158 million.

EBITDA has been upgraded from $56–61 million to $58–62 million.

The key catalysts for this change included better than expected 1H18 results, higher utilisation levels at the end of 1H18, record project fees, and record ecosystem growth.

Scroggie claims the company will accelerate new project investments in the second half of FY18, and that NEXTDC is ‘…in an outstanding position to take advantage of current and future customer opportunities.

From this time last year, investors have raked in over 125% on their holdings.

Regards,

Ryan Dinse,                                       

Editor, Money Morning  

and

Jack Cameron,           

Junior Analyst, Money Morning

PS: If you’re looking to potentially take your portfolio to the next level, check out our latest report, ‘Aussie Stock Gains Masterclass’, which will show you how to pick the stocks that could potentially make outsized returns. To check it out, click here.

Ryan Dinse

Ryan Dinse

Ryan Dinse is an editor at Money Morning. With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle.

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