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01/10 22:56
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call indicates strong financial performance with a 10.2% revenue increase and 11.4% EBITDA growth. Asset monetization has improved financial health, reducing net debt ratio and interest rates. Positive AI-driven demand and strategic land acquisitions in China further bolster growth prospects. Although management was vague on some details, the overall sentiment remains positive, supported by optimistic guidance and strategic initiatives. Given the market cap, a 2% to 8% positive stock price movement is expected.
Revenue Increased by 10.2% year-on-year. The increase is attributed to the recovery of the business since last year.
Adjusted EBITDA Increased by 11.4% year-on-year for Q3 2025. For the first 9 months of 2025, adjusted EBITDA grew by 15.4% year-on-year on a pro forma basis. The growth is due to the deconsolidation of data center project companies sold to ABS and C-REIT, as well as strong new bookings in Q1 2025.
Gross Additional Area Utilized Around 23,000 square meters in Q3 2025. This is part of achieving the highest year of move-in, driven by delivering long-term backlog and new orders.
New Bookings 75,000 square meters or 240 megawatts for the first 9 months of 2025. Expected to reach nearly 300 megawatts for the full year, with 65% of bookings being AI-related. Growth is driven by increased AI demand and investments in AI infrastructure.
Organic CapEx RMB 3.8 billion for the first 9 months of 2025. Expected to be RMB 4.8 billion for the full year. Net of asset monetization proceeds, CapEx will be around RMB 2.7 billion. The reduction is due to proceeds from asset monetization.
Operating Cash Flow Expected to be around RMB 2.5 billion for the full year of 2025. This is supported by asset monetization proceeds, making the China business almost self-funding.
Net Debt to Adjusted EBITDA Ratio Decreased from 6.8x at the end of 2024 to 6.0x at the end of Q3 2025. The decrease is due to cash proceeds from asset monetization, deconsolidation of project company debt, and offshore equity capital raise.
Effective Interest Rate Dropped to 3.3% in Q3 2025. This is attributed to the favorable interest rate environment in China.
AI-related bookings: 65% of bookings in 2025 are AI-related, with a total of 75,000 square meters or 240 megawatts booked in the first 9 months. The company expects nearly 300 megawatts for the full year.
AI infrastructure preparation: Secured 900 megawatts of powered land in Tier 1 markets for AI demand, with plans to acquire more.
China market inflection: The domestic tech industry is at a critical juncture with major players investing heavily in AI infrastructure, signaling recovery for the data center sector.
C-REIT success: First IPO of a data center REIT in China was completed, trading 45.8% above IPO price as of August 2025. This provides a competitive advantage in accessing capital.
Revenue and EBITDA growth: Revenue increased by 10.2% and adjusted EBITDA grew by 11.4% year-on-year in Q3 2025.
Asset monetization: Proceeds from asset monetization reduced net CapEx to RMB 2.7 billion, making the China business nearly self-funding.
Strategic shift towards AI: The company is focusing on AI demand, with plans to monetize assets through the C-REIT platform and invest in new data centers to address the AI demand wave.
AI demand in China: AI demand in China is still at a very early stage, and while there is significant potential, the domestic tech industry is at a critical juncture. This creates uncertainty about the pace and scale of AI-related growth.
Powered land availability: The company has secured 900 megawatts of powered land but acknowledges that this may not be sufficient to meet future AI demand, creating potential challenges in scaling operations.
Regulatory hurdles for C-REIT: The regulatory review process for post-IPO asset injections into the C-REIT is time-consuming, which could delay capital recycling and new investments.
Subdued new bookings: Relatively subdued new bookings since the second quarter of 2025 may impact the company's growth rate in the near term.
High net debt levels: Despite improvements, the company's net debt to EBITDA ratio remains at 6.0x, which could pose financial risks if market conditions deteriorate.
Revenue Guidance: The company is on track to achieve the midpoint of its revenue guidance for the full year of 2025.
EBITDA Guidance: The company expects to achieve at or above the top end of its EBITDA guidance for the full year of 2025.
Future Bookings and Growth: The company foresees higher bookings next year, leading to growth acceleration thereafter.
AI Demand and Market Recovery: AI-related bookings account for 65% of 2025 bookings, with expectations for continued growth in AI demand driven by domestic technology advancements and significant investments in AI infrastructure by major players.
Powered Land for AI: The company has secured around 900 megawatts of powered land in Tier 1 markets suitable for AI demand and is in the process of securing more, as 900 megawatts is deemed insufficient.
Capital Access and Monetization: The company plans to inject more assets into its C-REIT in 2026, targeting an enterprise value of RMB 4 billion to RMB 6 billion for the first post-IPO asset injection. This will enable efficient and repeated asset monetization to fund new investments.
CapEx Projections: Organic CapEx for 2025 is expected to be around RMB 4.8 billion, with net CapEx (after asset monetization proceeds) around RMB 2.7 billion.
Debt and Interest Rate Environment: Net debt to adjusted EBITDA multiple decreased to 6.0x by the end of 3Q '25, with a favorable interest rate environment in China reducing the effective interest rate to 3.3%.
Implied dividend yield: 3.6% based on the projected cash available for distribution, as stated in the C-REIT offering memorandum.
C-REIT platform: The company has created a C-REIT platform to recycle capital on a repeated basis, unlocking value for shareholders and freeing up funds for new investment. The C-REIT started trading on the Shanghai Stock Exchange on August 8, 2025, and has shown significant growth in value since its IPO.
Post-IPO asset injection: The company plans to inject assets with a target enterprise value of RMB 4 billion to RMB 6 billion into the C-REIT during 2Q '26, following regulatory approval.
The earnings call indicates strong financial performance with a 10.2% revenue increase and 11.4% EBITDA growth. Asset monetization has improved financial health, reducing net debt ratio and interest rates. Positive AI-driven demand and strategic land acquisitions in China further bolster growth prospects. Although management was vague on some details, the overall sentiment remains positive, supported by optimistic guidance and strategic initiatives. Given the market cap, a 2% to 8% positive stock price movement is expected.
The earnings call reveals strong financial performance with revenue and EBITDA growth, a high utilization rate, and successful market expansion. Despite stable guidance due to upcoming deconsolidation impacts, management's optimism about future growth, solid partnerships, and strategic expansion into new regions are positive indicators. The Q&A section highlights confidence in asset monetization and future growth plans, further supporting a positive sentiment. Given the mid-sized market cap, these factors are likely to result in a 2% to 8% stock price increase over the next two weeks.
The earnings call presents mixed signals. While the company shows strong financial performance and optimistic guidance, there are concerns about AI chip supply, regulatory delays, and competitive pressures. The unchanged guidance and lack of shareholder return plans do not provide additional positive catalysts. The Q&A reveals strong demand, especially in AI, but also highlights uncertainties in self-funding timelines and regulatory impacts. Given the company's market cap, the stock price is likely to remain stable, resulting in a neutral prediction for the next two weeks.
The earnings call highlighted strong financial performance with a 12% revenue increase and a 16.1% rise in adjusted EBITDA, alongside strategic asset monetization and a promising C-REIT offering. Although there were some concerns about reliance on external financing, the company's robust demand, especially in AI, and optimistic guidance for 2025 and beyond suggest positive sentiment. The Q&A session reinforced confidence in demand and operational stability. Given the company's market cap, a positive stock price movement of 2% to 8% is likely over the next two weeks.
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