4Q23 adjusted EBITDA grew 5.7%; FY24 EBITDA guidance implies c.9% y-o-y growth, in line
- Adjusted EBITDA increased by 5.7% y-o-y in 4Q23, driven by 13% increase in utilised area
- FY24 adjusted EBITDA guidance implies c.9% y-o-y growth, in line with market expectations
- Maintain BUY on GDS for its rapid overseas market expansion
FY24 EBITDA guidance implies c.9% y-o-y growth, in line. GDS (9698 HK / GDS US) announced its 4Q23 results on 26 March 2024 after Hong Kong market close. Revenue increased by 6.3% y-o-y to Rmb2,556m in 4Q23, mainly driven by 13% increase in utilised area to 419k sqm. Average MSR (monthly service revenue) decreased by 5% y-o-y to Rmb2,085 per sqm, largely due to the dilution effect from B-O-T projects. Area in service increased by 11% y-o-y to 573k sqm, with utilisation rate increased by 1.3ppts to 73.1% and commitment rate decreased by 2.7ppts to 92.8%. Areas under construction decreased by 5% y-o-y to 183k sqm, with pre-commitment rate increased by 4.9ppts to 76.4%. Adjusted EBITDA increased by 5.7% y-o-y to Rmb1,133m, with adjusted EBITDA margin contracting 0.3ppt y-o-y to 44.3%. Net loss expanded to Rmb3,165m, compared to Rmb178 in 4Q22, due to a Rmb3,013m of impairment loss of long-lived assets. Management is guiding revenue and adjusted EBITDA of Rmb11,340m-Rmb11,760m and Rmb4,950m-Rmb5,150m in FY24, implying 13.9-18.1% and 7.0-11.4% y-o-y growth, respectively. Capex budget is Rmb6.5bn for FY24, compared to 6.3bn in FY23.
International expansion on track with successful fund raising. Customer move-ins continued to improve, with a net additional utilised area of 20k sqm in 4Q23 (for which, net additional utilised area from international market doubled), exceeding the past quarter’s 16k sqm. Moreover, the company announced a successful US$587mn equity raise for its international business (GDSI), by issuing series A convertible preferred shares to a group of private equity investors. The company stated that the valuation of GDSI is at c.24x FY25 adjusted EBITDA and GDS will own c.56.1% of GDSI post-closing. The proceeds of c.Rmb4bn can support one year of capex for its international business. The international portfolio currently comprises 330MW of capacity in service and under construction and a further 340MW held for future development across locations in Hong Kong, Singapore, Malaysia, and Indonesia. Management reiterates that the international business will reach at least 15% of its adjusted EBITDA within next three years, and is currently exploring investment opportunities in additional markets liked Japan and Korea. We maintain BUY on GDS for the stabilised domestic market and its rapid overseas market expansion.