News Alert: Convertible notes issuance to Sequoia, ST Telemedia Global Data Centres and an Asian sovereign fund
- GDS will sell US$620m convertible senior notes to Sequoia China, ST Telemedia Global Data Centres and an Asian sovereign fund
- GDS entered into strategic cooperation agreement with Sequoia China to pursue data centre development, acquisition and investment opportunities in China and overseas
- The investment from the investors could provide additional capital to support GDS’s domestic and overseas expansion
- Expect positive share price reaction to the additional capital injected from the private placement
What’s New
– GDS (9698 HK/GDS US) announced to enter into agreements to sell US$620m in aggregate principal amount of 0.25% convertible senior notes due 2029 to Sequoia China Infrastructure Fund I, ST Telemedia Global Data Centres, and an Asian sovereign wealth fund (collectively, the “Investors”), before HK market open on 22 Feb 2022.
– The notes are convertible into GDS’s ADS at US$50 per ADS, representing c.17% premium to the close price on 18 Feb 2022 of US$42.59.
– GDS also entered into strategic cooperation agreement with Sequoia China to pursue data centre development, acquisition and investment opportunities in China and overseas.
Our View:
– The private placement is +ve to GDS as it will provide additional capital for business growth, given the challenging public fund raising environment.
– We forecast a capex of Rmb14billion for FY22 and US$620m investment from the investors could potentially contribute c.30% of the capital needed.
– The potential dilution of the convertible notes (if fully exercised) is c.7%.
– We currently rate BUY on the counter; TP of HK$70/US$71.