CyrusOne Has A Secret Weapon
- China will experience the fastest growth regionally in public cloud spending – enabling it to pass the UK, Germany and Japan – to occupy the #2 spot (after the U.S.).
- The lag between adoption of a new technology paradigm in the U.S. and adoption of the same paradigm in China is shortening.
- CyrusOne management has proven that it can provide shareholder value, and I am maintaining my recommendation: Buy-Buy-Buy.
“CONE (and most Data Center REITs) are not high yielding stocks, but the primary reason for owning shares in CONE (and other Data REITs) is because of their growth potential.”
The hyper-scale cloud companies that the industry is servicing are putting up tremendous quarters with very high growth rates, and CONE expects that this growth will continue to parallel the growth in the cloud companies both in the U.S. and internationally.
One such a company that I will be focusing on today is GDS Holdings Limited (NASDAQ:GDS), a leading high-performance data center operator and service provider in China. GDS is the leading developer of data centers for China’s fast-growing cloud service provider platforms and large Internet customers.
GDS has competition, but the company has become the largest service provider to China’s fastest-growing segment by developing specific design and contracting methods to uniquely serve their needs. As viewed below, GDS has more than 500 customers that it serves, mainly large-scale Internet companies, financial institutions, telecommunications and IT service providers, as well as large domestic and multinational companies.
The GDS investment thesis is predicated on the company’s fast growth rate, combined with its self-developed data centers in Tier 1 markets, as can be seen below (in Beijing and Shanghai):
In addition, GDS operates data centers in Shenzhen, Guangzhou and Chengdu:
According to Guggenheim Research, “China will continue to see high growth in the digital economy as national Internet access penetration rate remains low, and enterprise cloud adoption is at a very early stage.”
According to the China Academy of Information and Communications Technology, the country’s digital economy totaled ¥26 trillion in 2017, or 32% of national GDP. In addition, growing 18% Y/Y, it significantly outpaced growth in the overall Chinese economy, which grew 6.9% in 2017.
According to a recently published article, IDC predicts China will experience the fastest growth regionally in public cloud spending – enabling it to pass the UK, Germany and Japan – to occupy the #2 spot (after the U.S.) by 2021.