Equinix Inc
The latest investment analysis on Equinix Inc
Group Research - Equities18 Mar 2024
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Company Overview
Equinix, Inc. is a global data centre service provider catering to a diverse customer base across industries such as technology, finance, media, healthcare, and more. Equinix's operation reaches business hubs across the Americas, Europe, Asia-Pacific, and the Middle East. In addition to its core data centre leasing business, the company also provides services like digital infrastructure, data exchange, and private connections to hypercloud providers, such as AWS and Microsoft Azure.


Investment Overview
Global leader in the data centre industry. Equinix holds a 13% market share in the data centre space, with 248 data centres in 32 countries across six continents. The company has 44%, 34%, and 22% of revenue coming from America, EMEA, and Asia-Pacific, respectively. It also has one of the most interconnected ecosystems, as it serves 10k+ customers and has 456k+ total interconnections within its facilities. Equinix has a very good track record of growth and profitability. It has 20 years of consecutive revenue growth and sustained a 45%+ adjusted EBITDA margin in the past 10 years.

Solid pipelines to fuel future growth. Equinix estimates that it will have 363k cabinet equivalent capacity by the end of FY23, compared to the current 349k total cabinet capacity. In terms of project pipelines, the company has 50 data centre projects underway across 40 markets, which will come into service in the coming three years. In terms of new cabinet adds, the company is planning to add 16.9k, 19.1k, and 3.9k cabinets in 2023, 2024, and 2025, respectively. Among that, 43%, 27%, and 29% of their new capacity will be in America, EMEA, and Asia-Pacific, respectively.

Diversified customer mix reduces exposure to macro volatility. Equinix's 10k+ customer base comes from a diverse set of industries, with 36%, 35%, and 22% of them from the cloud, enterprise, and network sectors, respectively. The company’s strength also stems from its unmatchable global reach, with 65% of its recurring revenue coming from customers deployed across all three regions. Its top 10 customers account for 18% of its MRR and top 50 customers account for 38% of its MRR. Moreover, the occupancy is bound to be very stable with very high lease terms – over 18 years on average and 70% of leases expiring after 2037.

Rate BUY with a TP of US$955. Our TP is based on 27x EV/EBITDA, c.2SD above the five-year average multiple of 21x, on the back of the company's robust and diversified project pipelines across different countries.


Risks
Foreign exchange rate risk. More than 50% of Equinix's revenue is contributed by the APAC and EMEA markets.

Customer in-sourcing. Hyperscale cloud providers – the largest existing tenants of data centres – may opt to move all or significant data centre servers in-house.

Topic

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