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thoughts on ASX: NXT

Discussion in 'Other Asset Classes' started by JDP1, 29th Apr, 2016.

  1. JDP1

    JDP1 Well-Known Member

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    Im thinking of buying some of asx:nxt

    Im not the biggest bull on their business, but thats probably because i dont know too much about it.

    They dont look cheap- near 5 yr highs, but have had good financial milestones last FY.

    The industry seems to be grwoing, barriers to entry are high, a fair amount of value add and innovation to be had in the industry, established presence already as no 1 in aust marketplace.

    Probably about 8 mo to 1 yr late ...but still a good buy? I have briefly seen their annual report and seems ok to me. Main drawback is capital intensiveness of the business especially in asset construction/acquisition but are on a growth path with sales and new business , and im sure will continue, especially with new innovation in the pipe and via partnerships with the big US cloud vendors.
    Cant see this industry not grow and they are well positioned to take advantage of growth in the australian market. Im not a bull on australian tech stocks, but am on this one, i think?
    Looking at 2 yr hold- should see about 50% growth in share price?
     
  2. Nick Valsamis

    Nick Valsamis Well-Known Member

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    Just some food for thought.

    "Nextdc Ltd (ASX: NXT) has been downgraded to a moderate sell. At the start of the year there was speculation the data centre provider was going to be a takeover target, but nothing ever eventuated. This speculation and a big new contract win have helped take the share price 21% higher so far in 2016. But at almost 10x sales the company is trading at more than twice the level of the sector average, which itself is far higher than the market average. It appears as though brokers now feel the shares are a little too expensive."

    Source: 7 ASX shares that were just downgraded by brokers
     
  3. JDP1

    JDP1 Well-Known Member

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    Yes thats the issue with tech stocks like this one..its valuations are high based on future profitability..its a bit of a punt...might be worth a small at risk investment.
     
  4. Nick Valsamis

    Nick Valsamis Well-Known Member

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    Depends though. If you do that, you may as well hit a cheap speculative stock where you at least have more upside if it works out.

    But if I was to invest considerable money then I would look at stocks that can be held long term for yield and likely price gains.
     
  5. JDP1

    JDP1 Well-Known Member

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    Dunno..i have a good feeling about this one. Their commanding market presence in a growth industry with growinh top line sales revenue ticks some good boxes for me. Barriers to entry are high and they have good partnerships amd networks in place. As long as they can keep implementing innovations either home grown or via their US partnerships...they should be ok.
    Unlike speculative penny stocks, these guys have proven presence and customers/cash flow and brand in their market and that counts for something- all of which are on the ascendency.
     
  6. Nick Valsamis

    Nick Valsamis Well-Known Member

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    It sounds like you have some metrics to base your decision on. Interesting to see how this stock plays out over the next 1 year period though.
     
  7. JDP1

    JDP1 Well-Known Member

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    well...if i had gone in on the 29th April when we were discussing this one...i would have made a cool and easy 6.6% return....lol
    Im gonna go with my gut feel from now on:)
     
  8. Nick Valsamis

    Nick Valsamis Well-Known Member

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    Yes if you did then you would have. But you know if it had gone down then you would have hated your gut feeling afterwards.
     
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  9. JDP1

    JDP1 Well-Known Member

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    yeah..but i think from doing some DD on their financial statements, they look good; EBITDA and top line sales growth are all looking good...and increasing faster than costs.
    Besides I also think they are a takeover target. They are looking to expand more into mel and bris with additional DC's and that capacity increase will be seen as very attractive in a growth market. Im quite sure someone like US giant rackspace (NYSE:RAX)will make a play for these guys. They just have all the things you would look for in a takeover target- expansion on ebitda, increasing top line, larger and more established customer wins such as the Federal govt, Electoral commission, etc..market leading presence, established partnerships with US complimenting vendors, in discussions currently to procure/build 2 new facilities to increase capacity ( a sign of expected customer growth), customers increasingly moving to the cloud incl government departments, etc...
    You heard it here first...you can write this down as a PC Chat prediction that will come good. Its almost a sure bet as saying the Brisbane market going to increase this year...:)
     
  10. JDP1

    JDP1 Well-Known Member

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  11. Nick Valsamis

    Nick Valsamis Well-Known Member

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    You did have some good reasoning as well.
     
  12. JDP1

    JDP1 Well-Known Member

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    despite its high price/valuation, interesting to note average analyst recommendations are in the top 25% percentile, in the 'outperform' category as per the link above. If the valuations were not so high, im sure the recommendations would be higher.
     
  13. JDP1

    JDP1 Well-Known Member

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    Stock has risen about 25% since i started hyping it from end april till now...damn im good :)
     
  14. Nick Valsamis

    Nick Valsamis Well-Known Member

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    That's a massive gain.
     
  15. JDP1

    JDP1 Well-Known Member

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    @Nick Valsamis
    FYI...Nxt is still doing good.
    I've been hyping it since it was around 2.90 per share...and thought it was priced in then...
    It's now 4.11
    NEXTDC Ltd (NXT.AX) Quote | Reuters..
    Almost a 42% gain since.
    Yup..that's how good I am at hyping :)
     
  16. CheckMate

    CheckMate Member

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    I wish the same was true in your Brisbane hype thread ;):rolleyes:
     
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  17. hash_investor

    hash_investor Well-Known Member

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    The gains are now capped I guess
     
  18. JDP1

    JDP1 Well-Known Member

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    Nope...4.31 and looks to be on a good growth path. Variable a bit though but their fundamentals are decent although fairly lofty valuations - which is not uncommon in that industry.
    I think they will still be a takeover target by larger US player. I'd wait for that before selling. It's a bit of a gamble though, but eventually it will happen given their commanding market presence in Australia.