DXN Ltd: Q4 Cash Receipts up 219% on Pcp, Strong Cost Containment
Quarterly update
DXN Ltd
Q4 cash receipts up 219% on pcp, strong cost containment
DXN Ltd (ASX:DXN) is a vertically integrated prefabricated modular data centre business with manufacturing facilities in Perth and its own data centres, SYD01, at Sydney Olympic Park in Sydney and the recently acquired Data Centre 3 in Hobart, Tasmania. The company has reported Q4 cash receipts of $1.765m, up 218.6% on the previous corresponding quarter with strong cost containment evident in this result. Costs, apart from product manufacturing costs which are directly related to sales, were down across the board. Costs for the quarter were $2.58m, bringing total costs for 2H FY20 to $5.98m. Cash receipts for 2H FY20 were $3.9m, lower than our forecast for $5.2m but cash costs were lower than our forecast of $8.3m for 2H FY20. We have incorporated the final quarter result in our FY20 forecasts taking into account the company’s guidance for $5m in revenue but also the lower cost base. This has had the effect of increasing our base case DCF valuation by $0.01/share to $0.09/share fully diluted, implying a forward 12 months EV/Sales multiple of 7.97x.
Business model
DXN Ltd designs, builds, owns and operates prefabricated modular data centres. The company achieved an industry first to become the first modular data centre developer to receive both Uptime Institute Tier-Ready III and Tier-Ready IV design review awards. DXN owns its own modular co-location data centre, SYD-01, in leased premises at Sydney Olympic Park which is being expanded to 800kW capacity from its initial 400kW (1.0MW core supporting infrastructure). It is also recently acquired the TasmaNet DC3 centre in Hobart which has delivered another 30 racks and expanded DXN’s footprint beyond Sydney. Revenue is being generated from manufacturing prefabricated data centre modules for third parties and operating and renting rack space in its co-location data centres.
Q4 FY20 result and outlook
DXN has delivered strong Q4 cashflows with costs containmen the key feature of the result. Cash receipts for the quarter were $1.765m, up 218.6% on pcp, but down from the $2.1m reported in Q3 FY20. This brought total cash receipts for the year to $5.337m, in line with the company’s June guidance for full year revenue to be around $5m, but below of forecast for $6.8m. Costs for the quarter were $2.58m, including $0.9m for product and manufacturing costs which are directly related to the sales contracts secured for data centre and cable landing stations. Monthly cash burn reduced 68.5% in Q4 to $0.203m, compared with Q4 FY19. Cash costs were lower than we had been forecasting for the year and as a consequence, we have incorporated the result into our forecasts. We are now forecasting a net loss o $7.9m for FY20 versus our previous forecast for a net loss of $8.3m. The company commented that it expected a stronger FY21 for its Sydney DC, that DC3 in Hobart would deliver a significant contribution to revenue and cashflow in FY21 and that its modules business had responded to a number of proposals in the final quarter.
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