GDS Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 19, 2025

There are 9 speakers on the call.

Operator

Hello, ladies and gentlemen. Thank you for standing by for the GDS Holdings Limited Fourth Quarter and Full Year twenty twenty four Earnings Conference Call.

Operator

At this time, all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded. I will now turn the call over to your host, Ms. Laura Shen, Head of Investor Relations for the company.

Operator

Please go ahead, Laura.

Speaker 1

Thank you. Hello, everyone. Welcome to the fourth quarter and full year twenty twenty four earnings conference call of GDS Holdings Limited. The company's results were issued via news file services today and are posted online. A summary presentation, which we'll refer to during this conference call, can be viewed and downloaded from our IR website at investorsgdsservices.com.

Speaker 1

Leading today's call is Mr. William Huang, GDS' Founder, Chairman and CEO, who will provide an overview of our business strategy and performance. Mr. Dan Newman, GE's CFO, will then review the financial and operating results. Before we continue, please note that today's discussion will contain forward looking statements made under the Safe Harbor provisions of The U.

Speaker 1

S. Private Securities Litigation Reform Act of 1995. Forward looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risk uncertainties is included in the company's prospectus as filed with the U.

Speaker 1

S. SEC. The company does not assume any obligation to update any forward looking statements except as required under applicable law. Please also note that GDS's earnings release and this conference call include discussions of unaudited debt financial information as well as unaudited non GAAP financial measures. GDS's press release contains a reconciliation of the unaudited non GAAP measures to the unaudited's most directly comparable GAAP measures.

Speaker 1

I'll now turn the call over to GDS's Founder, Chairman and CEO, William Huang. Please go ahead, William.

Speaker 2

Thank you, Laura. Hello, everyone. This is William. Thank you for joining us on today's call. The race is on for AI in China.

Speaker 2

We saw the beginnings of it last year when cloud and Internet companies increased their CapEx. This led to an initial wave of demand for AI training in remote locations. Now the rate has gone to another level with demand for AI inferencing in Tier one markets. Based on our dialogue with our customers, this type of demand could run into multiples of gigawatts over the next few years. Looking at the opportunity for from GDS perspective, it is exciting at times to be a data center company again.

Speaker 2

The opportunity in tier one markets plays to our strengths. We are by far the best positioned in terms of land and power to fulfill this kind of demand. And the largest cloud and Internet companies in China are all our largest customers. A key fact affecting the timing of customer deployments is the availability of chips. For deployments over the next few quarters, we do not see any significant risk, and we are willing to commit to new business.

Speaker 2

However, for deployments further into the future, we think the right approach for us is to wait and see The demand supply situations in Tier one markets continues to improve, and we have the flexibility to decide when to move forward. We just executed our first asset monetization transaction. From a financial perspective, this enable us to address immediate opportunities without deviating from our current path and the strict discipline. As our asset monetization program become fully established, we will have flexibility to do more while delivering on our commitments to shareholders. Several years ago, we laid out a strategy to get GDS back on track with steady growth and a stronger financial position.

Speaker 2

We remain firmly committed to this strategy. We focus on Tier one markets where we can add most value. We prioritize delivering the backlog. We remain highly selective about new business, pursuing orders which match our inventory and which have faster moving schedule. We incur CapEx when needed with short lead time ahead of our customer moving.

Speaker 2

We recycle capital through asset monetization, which is repeatable and scalable. And we create additional value through our equity stake in day one, which is now a stand alone business. Let's review our progress in implementing this strategy. Our gross move in during 2024 was 79,000 square meters, all organic and all in Tier one markets. This is the highest in our history.

Speaker 2

The move in rate picked up in 1Q twenty twenty four and has stayed at a consistently high level into the currency year. The pickup was due to a combination of backlog delivery and the new orders with fast moving. As shown on Slide seven, we started 2025 with 110,000 square meters of backlog for area in service. We expect to deliver over half of this during the current year. We ended 2024 with a utilization rate of 74%.

Speaker 2

We expect utilization to increase to high 70s percent by end of twenty twenty five. Our growth additional area committed during 2024 was 49,000 square meters, similar to the past two years, In line with our strategy, we targeted new business to absorb in inventory. A good illustration is the three new orders, which we won in 4Q 'twenty four, all related in capacity in service or under construction. During 1Q 'twenty five, we won a massive new order with existing hyperscale customer for around 40,000 square meters or 152 megawatts, split across two sites in Lanfang and Changshu. It is the largest single order in our history in China.

Speaker 2

This new order requires us to deliver data center within six months. The customer committed to moving fully within the following six months. The whole cycle from obtaining the new order to full utilization is about one year. This is a high quality AI driven new business with no chip supply risk. It fully satisfies all of our criteria for CapEx with a short lead time, fast moving and the long counter tenant.

Speaker 2

Furthermore, the sites are existing campuses where we already invested in past years. As a result, we only needed to incur the cost to complete and we are able to meet the deadline for rapid delivery. For air inferencing in Tier one market, hyperscale customers typically require sites with a lot with at least 15 megawatts of available capacity deliverable within a short period of time. Fortunately, we are very well paced in this regard. We have multiple sites suitable for AI inferencing around Beijing, Shenzhen Beijing, Shanghai and Shenzhen, Guangzhou.

Speaker 2

After completing the 152 megawatts new order, we will still have a tap around 900 megawatts of deliverable capacity. As demand continues to grow, they are after few sites in Tier one markets with the necessary scale and the time to market. This should benefit this should benefit us. Turning to Slide 13. I would like to share some operating updates for day one, which became our equity investee upon closing of its Series B equity rates.

Speaker 2

In 2024, Daewon accomplished a historical three forty megawatts of new commitments. Day one ended 2024 with four sixty seven megawatts of total IT power committed, most of which will be available within the next two years. Day one's sales pipeline is highly visible and strong. Day one is confident of doing over two fifty megawatts of new commitments during 2025 and remains on track to hit one gigawatt of total IT power committed in less than three years. I will now pass on to Dan for financial and operating review.

Speaker 3

Thank you, William. Day one's Trade Centers, previously known as GDS International or GDSI, completed and closed its Series B equity raise on 12/31/2024. At closing, GDS's equity interest in Day one was diluted from 52.7% to 35.6%. Accordingly, GDS deconsolidated Day one as a subsidiary and recognized Day One as an equity investee. In the consolidated financial statements for the quarter and year ended 12/31/2024, Day One's operational results and cash flows have been excluded from the company's financial results from continuing operations and have been separately itemized under discontinued operations.

Speaker 3

Retrospective adjustments to the historical statement of operations and cash flows have also been made to provide a consistent basis of comparison for the financial results. Furthermore, retrospective adjustments were also made to categorize Day one's assets and liabilities as assets and liabilities of discontinued operations on balance sheets for the comparative periods. From the first quarter of twenty twenty five onwards, day one will appear in our financials as a single line in our income statement and a single line in our balance sheet. However, in our earnings presentations going forward, we intend to continue disclosing key financial and operating information for day one, similar to what we disclosed when day one was the segment of GDS. So that investors can keep track of day one's performance and the value of our equity investment.

Speaker 3

Although we will no longer present GDS and day one on a consolidated basis, we did provide guidance on a consolidated basis for 2024. I would highlight that our pro form a consolidated adjusted EBITDA for 2024 was above the top end of our guidance range. From now on, I'm talking about GDS continuing operations. Starting on Slide 17. In 4Q twenty twenty four, revenue increased by 9.1% and adjusted EBITDA increased by 13.9% year on year.

Speaker 3

In 2024, revenue increased by 5.5% and adjusted EBITDA increased by three percent year on year. If we normalize the numbers by excluding one time items in 2023 and reversing the BO projects transfer in 2024, our revenue and adjusted EBITDA would have grown by 7.97.7% respectively. MSR per square meter declined 2.3% in 4Q twenty twenty four compared with 4Q twenty twenty three in line with our expectations. Looking forward, we expect MSR to decline slightly over the next year and we assume that power tariffs remain at current levels. Adjusted EBITDA margin for 2024 was 47.2% compared with 48.4% in 2023 or compared with 47.8% in 2023 excluding the one time items.

Speaker 3

This implies that on a normalized basis, EBITDA margins were flat. For 2024, our CapEx totaled RMB3 billion in line with our revised guidance. Our base case CapEx for 2025 was RMB2.5 billion. However, we will incur an additional RMB 2,300,000,000.0 as the cost to complete and deliver the 152 megawatt new order. Offsetting this increase, we expect to receive RMB500 million first installment of cash proceeds from the ABS transaction.

Speaker 3

In sum, we are giving guidance for around RMB4.3 billion of CapEx in 2025. Please note that this does not take account of the balance of proceeds from the ABS, further mega new orders or the proceeds of further asset monetization transactions in the current year. For the full year of 2024, our cash flow before financing is positive RMB $379,000,000. Once again, this is in line with our financial target. In 2025, with additional CapEx for the 152 megawatt new order, cash flow before financing will be negative.

Speaker 3

However, if we factor in debt deconsolidation and the deferred cash proceeds from the ABS transaction, we would still see no increase in our net debt. I'll come back to this point in a minute. As shown on Slide 24, at year end 2024, the cash balance was RMB7.9 billion and the net debt to last quarter annualized adjusted EBITDA multiple was 6.8 times. Turning to Slide 26, we recently announced our first asset monetization transaction. This involves selling 100% of the equity of certain data center project companies to an SPV managed by a major Chinese securities company with back to back issuance of ABS.

Speaker 3

For the avoidance of doubt, the ABS represents the equity of these projects and it is not a liability of GDS. The ABS is 70% subscribed by top tier institutional investors in China led by China Life, while GDS subscribes for the remaining 30% and retains the rights for ongoing operation of the underlying data centers. The ABS will be listed on the Shanghai Stock Exchange as a standardized security product. The total enterprise value or EV for the transaction is up to approximately RMB2.9 billion, implying an EV to EBITDA of around 13 times. The total equity consideration is up to approximately RMB1.7 billion or RMB1.2 billion net of the 30% reinvestment by GDS in the ABS.

Speaker 3

The upfront cash proceeds are around RMB 500,000,000 and the deferred net cash proceeds are around RMB700 million. The reason why there are deferred proceeds is because the underlying data centers are still ramping up. Upon closing, we will deconsolidate existing debt of around RMB 1,200,000,000.0. We are making good progress with our public REIT or CREIT application. It is moving forward faster than expected.

Speaker 3

CREITs are not permitted to invest in the equity of unlisted companies. However, they can invest through ABS. As shown on Slide 28, with the ABS transaction expected to close in the next couple of months, we can cover our '20 '20 '5 CapEx at RMB 4,300,000,000.0 without increasing our net debt. We expect our net debt to last quarter annualized adjusted EBITDA multiple to come down to just over six times at the end of the current year. With the recovery in our share price, our 2,030 CB is now deeply in the money.

Speaker 3

If we treat this CB as converted, our year end net debt to last quarter annualized adjusted EBITDA multiple will be around 5.5 times. Turning to Slide 29. For the full year of 2025, we expect our total revenues to be between RMB 11,290,000,000.00 to RMB 11,590,000,000.00, implying a year on year increase of between approximately 9.4% to 12.3% and adjusted EBITDA to be between RMB5.19 billion and RMB5.39 billion implying a year on year increase of between approximately 6.4% to 10.5%. In addition, as I already mentioned, we expect CapEx to be around RMB 4,300,000,000.0. On Slide 30, we look at our guidance a few different ways.

Speaker 3

Our official guidance takes into account deconsolidation of the datacenter projects underlying the ABS. On a normalized basis, if we assume the ABS did not happen, our adjusted EBITDA growth for 2025 at the midpoint would have been around 10.7%. This is consistent with the objective we set of getting back to double digit growth. Alternatively, if we take our official guidance and then add on the gain on the sale of the data center projects, the adjusted EBITDA growth for 2025 at the midpoint is around 16.7%. Lastly, the additional CapEx, which we will incur for the 152 megawatt new order in 2025 will lead to higher growth in 2026.

Speaker 3

Our current and very preliminary view is that adjusted EBITDA growth could be in the low teens for 2026 before taking out a further mega new orders or asset monetization. Finishing on Slide 31, we're not providing guidance for day one. However, we note that day one ended 2024 with run rate adjusted EBITDA of around $60,000,000 Based on the expected ramp up, we'll increase by multiples over the next two years. We'd now like to open the call to questions. Operator?

Operator

We will take our first question. And your first question comes from the line of Yang Liu from Morgan Stanley. Please go ahead. Your line is open.

Speaker 4

Thank you for the opportunity to ask question. I would like to have some visibility in term of your plan to spin off day one and let it go public. Could management update us in term of the current plan and the schedule. Yes, that is my question. Thank you.

Speaker 2

Thank you, Yanu. I think yes, I think last quarter, some investors asked the same question, but we don't have a clear view, right? Now I would like to say, we do have the plan. The IPO plan is more visible, and we plan to list the company within eighteen months. So I think this is achievable, and we are very confident based on the current international business.

Speaker 2

DayOne's business grows so fast, and we are very confident it will be a very successful IPO in next eighteen months and bring create more high value for our current shareholder.

Speaker 4

Thank you. May I follow-up in terms of the series progress Dan just mentioned? It's faster than expected growth progress here. What is the status now? Is this under NdRC or under CSRC or stock exchange?

Speaker 4

And should we expect it to come out in the next one or two or three quarters? What's your expectation now? Thank you.

Speaker 2

Yes. I think we say we made significant progress, definitely but we cannot disclose we don't allow to disclose so far, right? So I think maybe once we get the allowed to disclose, we will announce this progress updated immediately. And I think I remember, we last quarter, when we talked about the Sea REITs progress, we aimed to the end of this year. But I think the progress may be four or six months ahead than what we expect.

Speaker 4

Thank you.

Operator

Thank you. We will take our next question. Your next question comes from the line of Sarah Wang from UBS. Please go ahead. Your line is open.

Speaker 5

Thank you for the opportunity to ask questions. I have two questions, mainly on the China business. So first of all, may I ask whether the current CapEx is based on existing orders on hand, as management just mentioned that include the more than 150 megawatts order win in first quarter? And how shall we think about new order wins throughout 2025? Second question is regarding the existing vacant capacities.

Speaker 5

William just mentioned the AI inference demand from hyperscalers now they require more than 50 megawatts project size. And the existing capacity utilization ramp up is mainly driven by non AI demand?

Speaker 2

Yes. The first question is, I think the yes, this is the first quarter we have won the deal, which we announced, right? But of course, I think we see a lot of pipeline. But as I just mentioned, we are we will wait and see what's the chip supply situation, right? This is a key driver to drive the AI deployment in China data center.

Speaker 2

So I think there's something not very clear so far about in terms of the chip supply. Everybody know that, right? So we are very cautious on that. We are watching this situation very, very closely. So this is the key, let's say, criteria to let us decide go and go for some deal.

Speaker 2

So I think the number one, the demand from the all the hyperscaler is very strong. This is everybody can see from the all the CapEx guidance. This is for sure. But second, this is this trend this demand will maintain, not just today and this year. It will maintain three and five years.

Speaker 2

So this, we are very super confident for the current year's demand and the next few years' demand. But we are more patient because of some potential supply uncertainty chips. So we are very, very cautious to monitor all the supply change in the future, and then we can decide. On the other hand, we are ready to do anything anytime, any order if we wish. So we're ready for that.

Speaker 2

So just our current state strategy is wait and see and very selective to choose the new order. This is first question. The second question is, I think, of course, in the AI world, the first wave all invested in AI training. Now because the DeepSeek is a has triggered all the China inference coming more early than everyone everybody expects. So they bring DeepSeek we love DeepSeek.

Speaker 2

It's bring the order inferencing coming more early. It definitely fits our results where we located. So I think the inference requirement, it's a different totally different than the training requirement. Number one, it should stay close to cloud, traditional cloud, to collaborate to support enterprise. Number two, it will lead more new application come to more early.

Speaker 2

And this is also required very, very short latency. So this is all fit our resource, which we are located. So we can see in the next wave, the current wave, the coming wave is the inference is a huge benefit, good positive for GDS resource what we have.

Operator

Thank you. We will take our next question. Your next question comes from the line of Frank Louthan from Raymond James and Associates. Please go ahead. Your line is open.

Speaker 6

Great. Thank you. Can you characterize the types of customers and workloads that you're getting? So what percentage of that is AI versus more traditional cloud enterprise type business that you're seeing come in China today? And then what is the current book to bill rate?

Speaker 6

Meaning, how long are you is it taking you when you sign a contract when you're fully billing at the contracted terms? Historically, that was fairly lengthy. What does that current rate look like today?

Speaker 2

Yes. Very currently, I think the workflow in the Tier one market, which we are seeing we have seen is mainly driven by the increase, not training, right? Training Weibo, as I just mentioned, it's happening in the last two years. So we it's not in our strategy. So we are focused on the Tier one market.

Speaker 2

Our resource or in Tier one market is in line with our resource business strategy as well. So I think the what we are very clear, the currently in Tier one market demand mainly driven by the AI inference. And of course, in the meanwhile, it's also lead the traditional cloud deployment more faster than before. Yes, this is what we see, yes. This is number one.

Speaker 2

Number two, yes, just I just mentioned that we choose our criteria is if we use the current our capacity and the CapEx capacity in the data center under construction to fit our customer demand, shortened demand. I think this is lead time from the Optinda order to fully utilize is twelve months. It's much better than previous last couple of years order. Typically, last couple of years, typically two years, even longer, right? Now it's we, let's say, improved the lead time for us, yes.

Speaker 6

Are those lead times contractually obligated? Or is that just how quickly the customers want to move?

Speaker 2

Yes, absolutely. Yes, absolutely. And as I mentioned, the deal which we select, the contract length is much longer than before. Based on our current position, we are sitting in a very good position to negotiate near term compared with last couple of years. We are in well positioned.

Speaker 6

Okay, great. Thank you very much.

Operator

Thank you. We will take our next question. Your next question comes from the line of Timothy Zhao from Goldman Sachs. Please go ahead. Your line is open.

Speaker 7

Great. Thank you, management, for taking my question. I think the first question really is regarding the supply and demand dynamics that you see in the Tier one markets. As you mentioned that I think by end of this year, I think the utilization rate of GDS is, I think, approaching like a high 70s. Just wondering if you have any sense on the industry wide utilization rate?

Speaker 7

And also, how do you think about the pricing environment in the Tier one cities? And secondly, is regarding like day one, I think you mentioned that I think you foresee around two fifty megawatts new commitment for day one in this year. Just wondering if you can provide some color on the orders or the demand and what kind of what type of customers that you are seeing that contributing this new commitment? And what are the underlying demand like AI versus non AI? And if there's any like risks regarding cheap availability in this region?

Speaker 7

Thank you.

Speaker 2

Okay. The number one question in China, I think the Tier one market just start. Yes, as I said, they did all the AI giants. They just give the guidance official guidance start from this year, right? Last couple of years is mainly driven by the training.

Speaker 2

This year, the guidance is of course, it's the demand in the next three years, the demand will be shifted from the training pure training to training to inferencing. So this is as I said, this is best start to benefit us. But now but it's a situation since last a couple of last in the past, in the Tier one market even in the Tier one market, the supply and demand balance not balanced yet. It's a start. From my personal view, I would like to say after six or twelve months, this will rebalance.

Speaker 2

And then will the demand and the supply maybe after twelve months will turn around. So this is my view. And the current in Tier one market, there's a lot of the individual data center player, they used to have a lot of resource, but most of them are very fragmented. So not fit current AI demand. On the other hand, but there's still a few individual players that still have the large scale around the Tier one market.

Speaker 2

But I think given the time, I think this is will definitely will digest for the AI demand. But our strategy is very, very selectively to choose the pursue the order. And the best order the best deal for us is it fits our criteria. This is number one. Number two, so I think we another waiting for another way to see is we're willing to see the price getting improved.

Speaker 2

If that's the case, I think it's good market. It's turned around to the good market and a healthy market. This is more fit for us.

Operator

Day one.

Speaker 2

Day one, right?

Speaker 3

Due to like, it's around probably 70%.

Speaker 6

Different

Speaker 2

cloud and video company. So I think there is from different country, different application, different workload. So very diversified in the last year's order order, which we got from the international market. So this is number one. Number two, I think that in general, in Southeast Asia, the main deployment is not AI.

Speaker 2

It's high performance GPU and the cloud. So the main workflow for from the whatever Chinese customer or U. S. Customer is cloud growth and also the video application, Internet. High performance CPU, sorry, high performance CPU, not GPU in terms in the whole market percentage, still a small number, right?

Speaker 2

So I think the new chip policy will not impact whole Southeast Asia demand profile.

Speaker 7

Thank you. That's very clear.

Operator

Thank you. We will take our next question. Your next question comes from the line of Jonathan Atkin from RBC Capital Markets. Please go ahead. Your line is open.

Speaker 8

Thanks for taking my question. One China and then one, I guess, day one. So what's the use of the ABS proceeds? And can you give

Speaker 3

us a little bit of

Speaker 8

a flavor for the customer profile, margin profile, weighted average lease expiration, just any color about those stabilized assets that you're issuing capital off of? And then the day one question is maybe a little broader. You broke ground in Tronburi, I think, just a couple of days ago. What's the use case that you see for Thailand? And then any kind of update on AB and Bataan, what's going well, what are some of the challenges that you're seeing relative to your last conference call?

Speaker 8

Thanks.

Speaker 3

Yes. The ABS proceeds can be used either to pay down debt and delever or to reinvest if the right opportunity is there. And we look at new investment opportunities as being one part of the equation and asset monetization as being the other part of the equation. So this asset ABS issue has been achieved at a good time because we also presented with a very good new investment opportunity at around the same time. And when you put it all together, we are able to increase our CapEx, but keep our debt at the same level or lower and be able to achieve at the end of this year lower net debt to EBITDA.

Speaker 3

We have a lot of assets that are suitable for asset monetization treatment. We selected assets for the first transactions that we thought would be highly acceptable to investors. The asset we chose for the ABS happens to be one that we acquired a few years ago. And it has mostly financial institution customers, which obviously financial investors have high recognition for those kind of customers. But it doesn't have to be this way for the C REITs.

Speaker 3

We chose a different seed asset with quite a different profile. It's more of a cloud internet customer.

Speaker 2

Yes. Joe, let's talk about a little bit the groundbreak in Thailand. As we just announced the day before yesterday, I think this is a future. We are when we start to build the new data center, building new CapEx in Thailand. That means we have very, very strong customer demand back to us.

Speaker 2

So that's why we are start to build a new campus in Thailand. And the customer is mixed both from the demand in Thailand, the demand is very mixed, both from U. S. And China, Chinese customers. It's quite a mix here.

Speaker 2

So I think that we can see that this is we are we build this campus is the largest campus in Thailand so far. So I think we are very confident that demand will continue in Thailand. Thailand will be the new hub in Asia Pacific in Southeast Asia, even in Asia Pacific. So in terms of Baton, we I think we are very happy to talk about that. We delivered the first two phase, which we commit to our customer.

Speaker 2

And this is we have continued to build the remaining phase for our customer as well. So I think the Bataan project is going well. And we see based on this customer very good customer successful delivery. And I think there's more demand is coming to Bataan as well. So this is what happening in Bataan Island, yes.

Speaker 8

If I could sync one on China domestic, you highlighted big Internet demand, but then you also mentioned DeepSeek and there's a lot of there's a deep ecosystem of AI startups in China. And how do you see the sales funnel and kind of prospects in terms of score meters or megawatts sold from kind of AI startups within China versus established Internet companies that are also increasing their CapEx?

Speaker 3

Yes,

Speaker 4

I

Speaker 2

think the demand, right, so most are driven by the established company. And then we do see a lot of enterprise type demand is coming because this is just a start. A lot of small enterprise, The first phase is try their AI first. And they also internally, I think they now, I think the sentiment is very good for all the Chinese enterprise inside China because everybody try to leverage AI to improve their efficiency or increase their revenue. I think all the this is very popular right now.

Speaker 2

So I think given the time, I think it will the demand was mainly driven by the multi industry, yes. That's easy to see. I believe it will happen in the next few years. It's already it starts.

Speaker 7

Thanks, Richard.

Operator

Thank you. We will take our next question. Your next question comes from the line of Daley Li from Bank of America Securities. Please go ahead. Your line is open.

Operator

Hi management. Thanks for taking my question. I have two questions. One is regarding our future series issuance. How do you anticipate the evaluation range for this series?

Operator

Because if we look at other series in Asia China market, warehouse evaluation is pretty high like 20 times EBITDA to EBITDA. So what's our expanded valuation range for this and the yield? My second question is regarding the moving pace for China market. If we look at the NASDAQ a few quarter by quarter moving pace by the client, And as we have seen more rush orders for AI chips in 1Q, so would we could we expect maybe more faster ramp up in like 2Q or going forward? Thank you.

Speaker 3

Yes, Dave, thanks for your question. There's around 50 CREITs listed in China and we categorize them by the nature of the underlying assets. There's around 25 where the underlying assets are commercial real estate, industrial, business park, logistics and so on. And we think that subset is the best benchmarks for a potential data center C REIT. Those 25 companies is two or three outliers, but if we exclude them, what remains is trading in a very well defined range in terms of dividend yield.

Speaker 3

I believe that dividend yield is the driver of their valuation and the multiple is derived from that. The dividend yield is quite concentrated around 5%. And if we take that as a reference and assume conservatively that we would offer a data center CV at a yield premium, we can derive what the implied multiple would be for us in terms of our asset monetization and it's quite attractive. We set a benchmark 13 times with the ABS And we stated that the investors in the ABS had the explicit intention, when the time is right, when all the qualification criteria can be met to inject that ABS into a CREIT. So clearly, they expect you to be able to do that at some kind of valuation multiple pickup.

Speaker 2

Yes. In terms of the moving pace, right, I think as I just mentioned, the new order is six months moving pace. I think that means

Operator

what? Late this year.

Speaker 2

Yes, start from this year. I think this is a very big change compared with the last couple of years.

Operator

Thank you. Thank you. As there are no further questions, I'd like to now turn the call back over to the company for closing remarks.

Speaker 1

Thank you all for joining us today and we'll see you next time. Bye.

Speaker 2

Thank you.

Operator

This concludes this conference call. You may now disconnect your line. Thank you.

Remove Ads
Powered by Quartr
Earnings Conference Call
GDS Q4 2024
00:00 / 00:00
Remove Ads