FAST NEWS: High Power Costs Undercut GDS Holdings’ Profitability

The latest: Independent data center operator GDS Holdings Ltd. (GDS.US; 9698.HK) announced on Tuesday its revenue rose 24% to 2.31 billion yuan ($345 million) in the second quarter of the year, as its net loss widened 25.7% to 375 million yuan.

Looking up: Despite sluggish market conditions, the company’s data center space from committed and pre-committed customers increased by more than 13,000 square meters in the second quarter to 588,054 square meters as of June 30, up 16.1% year-on-year.

Take Note: The company’s gross profit decreased by 3.7% to 469 million yuan in the second quarter compared to the first. Its gross margin also decreased by 1.4 percentage points sequentially to 20.3% due to higher electricity prices and more seasonal electricity consumption, which led to higher electricity costs.

Digging Deeper: Founded in 2000, GDS is an information technology infrastructure services provider that was listed on the Nasdaq in 2016 and in Hong Kong four years later. The company has expanded into Southeast Asia in recent years, with management revealing projects in Indonesia and Malaysia that will turn the company into a regional data hub. In February it sold convertible notes worth $620 million to Singapore sovereign fund GIC and China-based private equity giant Sequoia Capital to raise capital for the international expansion.

Market Reaction: GDS’ New York-listed shares fell 2.7% to close at $25.29 on Tuesday. Its Hong Kong shares fell even more on Wednesday, closing down 7.2% to HK$24 at the midday break. The stock currently trades near the lower end of its 52-week range.

Translation by Jony Ho

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