ASX data centre stocks surged after the Airtrunk sale. Pic: Getty Images
Airtrunk’s deal of the year triggers re-pricing of ASX data centre stocks
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- Airtrunk’s $24 billion sale is 2024’s biggest Aussie deal
- ASX data centre stocks, including NextDC, surged after the sale
- Here’s a list of some ASX-listed data centre stocks
Airtrunk, the data centre business founded by Bangladeshi-born Aussie Robin Khuda, changed hands last week in a massive $24 billion deal with a consortium led by US private equity giant Blackstone.
The deal is the biggest Aussie corporate transaction of 2024 so far and ranks as the fifth-largest acquisition ever in this country.
Only four deals top it: Block’s $39 billion Afterpay buy in 2021, Westfield’s $33 billion sale to Unibail-Rodamco in 2018, the $32 billion Sydney Airport buy by super funds in 2022, and the $26 billion Newmont-Newcrest merger last year.
The consortium’s buying price was more than 20 times Airtrunk’s forecasted EBITDA.
Khuda came to Australia at 18 to study accounting at the University of Technology Sydney. He then earned an MBA in finance from Manchester Business School in the UK and furthered his studies in the US.
Before diving into the startup world, he worked in the corporate sector and used his retirement savings to launch Airtrunk in 2015.
Only four years ago, Airtrunk was valued at a ‘lowly’ $3 billion after Macquarie Group’s infrastructure division and The Public Sector Pension Investment Board (PSP Investments) acquired an 88% stake in the company.
With this latest sale to Blackstone, Khuda’s stake has been reduced to 5%, but it’s still worth more than $500 million after accounting for the company’s debt.
AI data centres are booming
People might be clued in on generative AI, but do most know about the data centres that keep all this tech ticking?
They’re basically huge warehouses where companies stash all their IT gear such as servers, data storage drives, and network equipment.
AI data centres, in particular, are extremely demanding and need a lot of resources – space, power and lots of cooling.
Current data centres can manage these high demands to some extent, but as the use of GPUs ramps up and rack densities increase, we need newer and newer designs to keep up.
AI data centres are characterised by several key features. They often handle high-density setups where each rack might need up to 50 kW of power.
Traditional air-cooling systems can’t keep up with the heat AI tasks generate, so liquid cooling is becoming more common to efficiently manage the temperature.
These centres also need advanced networking because AI tasks rely on parallel processing, which requires strong cabling and infrastructure within and between racks.
Sources say that running ChatGPT, for instance, costs OpenAI about US$700,000 per day.
The demand for data centre space and storage has skyrocketed in recent years. In the last quarter, Nvidia reported a jaw-dropping 427% jump in its data centre division.
Just like Nvidia’s, Airtrunk’s data centres business was also built to handle these massive demands.
Equipped with state-of-the-art technologies, they are strategically located in key economic centres across the Asia Pacific region, including Sydney, Melbourne, Singapore, Hong Kong, Tokyo, and Kuala Lumpur.
This prime positioning has drawn major clients such as Google, Amazon Web Services, Microsoft, and ByteDance, the parent company of TikTok – contributing to Airtrunk’s massive growth.
Re-rating of data centre stocks
The Airtrunk sale has triggered a re-rating of ASX-listed companies connected to data centres.
With Airtrunk valued so highly, it’s naturally making other data centre operators, such as NextDC (ASX:NXT), look pretty good in the eyes of investors.
Following the announcement, NextDC’s share price surged more than 12% last Thursday.
Since its launch in 2010, NextDC has established a strong presence in key Australian cities.
In Sydney, it’s got facilities like S1 and S2, which are being used by the city’s tech and finance sectors. The company also has hi-tech facilities in Melbourne, Brisbane, Perth and Canberra.
In all, NextDC now runs 16 data centres across Australia and is branching out to other countries including Auckland, Tokyo, and Kuala Lumpur.
The company is projecting revenue between $340 million and $350 million for the current financial year, with an expected EBITDA in the range of $210 million to $220 million.
Earlier this week, NextDC revealed it’s wrapped up a massive $550 million placement, issuing about 32.1 million new shares at $17.15 each.
CEO Craig Scroggie noted the strong backing of the cap raise shows confidence in the company’s growth plans for AI data centres.
“Our focus remains on maintaining the agility and innovation required to power the next generation of AI-driven technologies that help enterprises harness the digital age,” Scroggie said.
The acquisition of Airtrunk has also driven up the share price of adjacent companies in the sector.
Macquarie Group (ASX:MQG), which owned a chunk of Airtrunk, jumped 2% on the news to hit a record high.
Similarly, shares of Superloop (ASX:SLC), Vocus Group (ASC:VOC), and ActivePort (ASX:ATV), which are all linked to the data centre industry, also saw gains.
Other data centre stocks on the ASX
GDC is an investor in digital infrastructure assets and businesses, including data centres all over the Asia Pacific region, targeting an internal rate of return of 10% per annum.
After the sale of Airtrunk, GDC released a statement to investors.
GDC said it owned a stake in a fund managed by Macquarie Asset Management, which, as we already noted, has a share in Airtrunk.
As a passive investor in the fund, GDC wasn’t involved in the Airtrunk deal talks, but said it expects to receive around $123 million, or about $1.59 per security from this sale pending approval from the Australian Foreign Investment Review Board.
Once the deal is finalised, GDC plans to distribute these proceeds to its shareholders.
There’s no word yet on what GDC will do next after this distribution and the sale of its other assets, Etix Everywhere and Perth Data Centre.
Infratil is a New Zealand-based investment company that also focuses on infrastructure and utility investments. The company saw its shares rise 2% after the Airtrunk deal.
Infratil’s portfolio typically includes stakes in airports, energy generation and distribution assets, public transport systems, and data centres.
The company co-owns Canberra Data Centres (CDC) and mainly operates data centres in Australia and New Zealand.
Infratil’s stake in CDC is seen as a solid play for those interested in the data centre sector.
Also, it has big contracts with the government and Microsoft.
The conglomerate is heavily investing in data centres, focusing on expanding its data centre portfolio with a 5.0 GW of power capacity across 13 major global cities.
This expansion includes 2.5 GW of secured power, with a mix of completed facilities, ongoing projects and future developments.
Goodman’s strategy involves transforming its urban properties into high-value data centres. This shift is part of a broader approach to enhance site productivity and adapt to new technology demands.
By concentrating on urban infill locations, Goodman is turning under-utilised spaces into productive, multi-level data centres.
Goodman’s portfolio today includes existing and brand-new data centres located in some of the most sought-after availability zones including Tokyo, Hong Kong, Sydney and Frankfurt.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decision.
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