美股科技行业2018q3数据服务商

EquityResearchDataCenterDataEquityResearchDataCenterDataSami212538Michael2123253Q18Preview–GroupSentiment■InvestorMust-Read:Seeour2018DataCenterOutlook,“TheCloudHasFourWalls,”highlightingourviewsonthedatacenterlandscape.SentimentMixedGoingInto3Q2018EarningsResults:Following1Q18earningsresultsandthroughthe2Q18period,acceleratedhyperscaleCapexdrovematerialleasingvolumetokeywholesaleproviders,CyrusOne(CONE)andDigitalRealty(DLR),however,followingequityissuancestofundfuturedevelopmentandM&Aactivity,investorappetitehasbeenmixedonthegroupasawholegiventhedilutionofsharesissuedintothemarketandrisinginterestrates.Onbalance,wecontinuetoseehealthydatacenterleasingactivitygoingintothebackhalfof2018,drivenbycontinuedcloudgrowth,hybridenterprisecloudshifts,andoveralldemandfornextgenerationapplicationenablement.Forinterconnectiondenseplayers,Equinix(EQIX)andCoresite(COR),long-onlyinvestorscontinuetofavorthegrouplargelydrivenbytheinterconnectionbusinesses'competitivemoatsandpositioninginthebroadertechnologysupplychain;companieswithhighernetworkdensitiesandmatureecosystemsarefavored,whilegrowinginterconnectionbusinessesarenotreceivingasmuchcredit(includingCONE,DLR,SWCH,QTS)asthemoreestablishedoperators.Despitethemixedviews,wecontinuetofavorthegroupaltogethergiventheirdirectexposuretogrowingendmarketsandtechnologicalrelevance,butdoacknowledgevaluationoverhangsaskeydriversofYTD2018stockunderperformance,includingpressuredreturnsoninvestedcapitalyields,equitydilution,andrisinginterestrates.3Q18EarningsPreviewTopPick:Goinginto3Q18earningsresults,weseeCONEasourtoppick,largelydrivenbythecompletionoftheZeniumacquisitionandcontinuedstrengthinMSFTleasingactivitythatwehavegatheredthroughourindustrychannelchecks.Additionally,wehighlightthathyperscalecapexgrowthisprojectedat+46.5%for2018E,upfrom+38%levelestimatedaheadof2Q18earningsresults,indicatingincreasedITspendingactivityforthesectorasawhole,however,keycustomers,suchasMSFT,havebeenrelativelyflatfromaCapexspendingrevisionperspective,leadingustobelievethattherewillnotbeanaccelerationinCONEbacklogsigningsin3Q18vs.the2Q18recordlevel.Multi-TenantDataCenterLeasingActivitySetaRecordin1H2018:JLLReported292MWabsorptioninNorthAmericanmarketsin1H18,outpacing1H17by+33%.NorthernVirginiacontinueditsmarketleadandisontracktogrow+50%in2018Ecomparedto2017.PhoenixandDallas/FortWorthwerealsobrightspotsinthedata,Phoenixgrowing+100%in2017comparedto2016andlookingtobeatabout30MWofabsorptionin2018E,andDallas/FortWorthgrowing+139%in2018withsolidconstructiontrendsin2018E.MTDCconstructionindicates+10.1%■■■DISCLOSUREAPPENDIXATTHEBACKOFTHISREPORTCONTAINSIMPORTANTDISCLOSURES,ANALYSTCERTIFICATIONS,LEGALENTITYDISCLOSUREANDTHESTATUSOFNON-USANALYSTS.USDisclosure:Creditasonlyasinglefactorinmakingtheirinvestmentdecision.PRERESULTS每日每日免费获取报（增值服务关注回复：研究加入“起点财经”微信群18October(asof1H18)totalcapacitycomingonlinethrough2018and1H19ascomparedto+5.4%totalcapacityattheendof2017.OnaMWunderconstruction/totalMWinventorybasis,Phoenix,NorthernVirginia,andTorontoareleadingthegrowthtrendinMTDCconstruction.Phoenixisgrowing+55.7%,NorthernVirginiaisgrowing+34.4%,andTorontoisgrowing+21.3%onthisbasis.Powerrateshavegenerallybeenimprovingaswellacross18October(asof1H18)totalcapacitycomingonlinethrough2018and1H19ascomparedto+5.4%totalcapacityattheendof2017.OnaMWunderconstruction/totalMWinventorybasis,Phoenix,NorthernVirginia,andTorontoareleadingthegrowthtrendinMTDCconstruction.Phoenixisgrowing+55.7%,NorthernVirginiaisgrowing+34.4%,andTorontoisgrowing+21.3%onthisbasis.PowerrateshavegenerallybeenimprovingaswellacrosstheincreasinglylargeNorthAmericandatacenterinventories.PowerratesintheTier1marketsofChicago,Dallas/FortWorth,NorthernNewJersey,NewYorkCity,andNorthernVirginiahavebeenfallingfrom2014through1H18.PowerrateshavebeenincreasingorremainedflatoverthesametimeframeintheTier1marketsofLosAngeles,NorthernCalifornia,Amsterdam,Frankfurt,London,andParis.ISGIndexReportsCombinedMarketAnnualContractValue(ACV)Growthof+18%y/yin3Q18:OnOctober10th,2018,InformationServicesGroup(ISG)publishedthe3Q18ISGIndex,whichprovidesareviewofthelatestsourcingindustrydataandtrends.Overall,theindexdataimpliesstronggrowthacrossbothtraditionalandas-a-Servicesourcing,whichisanet-positivefordatacenters.TheindexreportedthatACVin3Q18reachedquarterlymarkof$11.7bn(+18%y/y)vs.$12.5bn(+30%y/y)in2Q18;withas-a-Servicereaching$5.7bn(+46%y/y)vs.$5.5bn(+53%y/y)in2Q18andtraditionalsourcingreaching$6.0bn(+0%y/y)vs.$7.0bn(17%y/y)in2Q18.Weviewthese3Q18growthratesasdemonstratingashifttowardsgreateras-a-servicesourcingandcontinuinggrowthwhichwillbenefitdatacenteroperatorsasawholegiventheirexposuretobothas-a-ServiceandtraditionalIT(enterprise)customers.CONE(Outperform,$73TargetPrice)–OurTopPickintoPrint:OurTopPickintoPrint:Goinginto3Q18,weestimaterevenue/adj.EBITDA/AFFOStobe$218.7mil(+24.8%y/y)/$119.1mil(+24.2%y/y)/$0.83(-3.0%y/y),respectively,aboveconsensus’revenue/adj.EBITDA/AFFOSestimates$208.4mil/$114.1mil/$0.80respectively.WereiterateourOutperformratingand$73targetprice.Thekeyfocusofthequarterwillbe■■thereportedtotalcombinedleasinghyperscaleCapexbacklogthatshouldincludeCONEandZenium’sbacklogfiguresonthebackofstrongEuropeanactivity,supportingourtoppickthesisforCONE,especiallyatP/2019EAFFOSof~16x,tradingwellbelowwhereitwaspriortotheequityissuancetosolidifytheawardedInvestmentGraderating.EQIX(Outperform,$520TargetPrice):Goinginto3Q18,weestimaterevenue/adj.EBITDA/AFFOStobe$1.28bn(+11.2%y/y)/$599.3mil(+8.9%y/y)/$5.03(+1.1%y/y),respectively,inlinewithconsensus’estimatesof$1.28bn/$598.6mil/$4.86andwithinthecompany’sprovidedguidancerange.WeanticipateFY18revenue/adj.EBITDA/AFFOStobe$5.07bn(+16.1%y/y)/$2.41bn(+17.3%y/y)/$20.66(+11.7%y/y)respectively,inlinewithconsensus’estimatesof$5.09bn/$2.41bn/$20.43.Assuch,wereiterateourOutperformratingand$520targetprice.AreasoffocusonnewhyperscaletenantsfromtheHITinitiative,itsglobalECXFabricstrategy,aswellasupdateson4Q18andFY2018revenue/EBITDA/AFFOguidance.ForeignExchangeheadwindswillalsohaveanimpactonAFFOSgiventhecontinuedmovementofFXagainstEQIX’scashflowtranslations.Additionally,investorswillbekeenonlearninghowtheinvestmentyeariswrappingupgiventhesignificantinvestmentintonewacquisitionsthathavedilutedpersharefigures(AFFOSforinstance).SWCH(Outperform,$14TargetPrice):SWCH(Outperform,$14TargetPrice):ForFY2018,wearecurrentlyestimatingrevenue/adj.EBITDAtobe$406.0mil/$197.4mil,respectively.Webelievethecompany’sstockpricehasbeenimpactedbyinsidersellingandhyperscalecapexspendingdecelerationfears,highlightedearlierinournote,whichmayexplainrecentpressureonthestock.Additionally,webelievethecompanyneedstobegin2■■Data18Octobermeetingrevenueguidanceexpectationsgivenitsresetfollowing2Q18earningsresults.WecontinuetoseeSWCHasundervaluedgivenitsstrategicfiberconnectivitynetworkanddatacenterintellectualproperty,supportingourOutperformratingand$14targetprice.DLR(Neutral,$130TargetPrice):Going18Octobermeetingrevenueguidanceexpectationsgivenitsresetfollowing2Q18earningsresults.WecontinuetoseeSWCHasundervaluedgivenitsstrategicfiberconnectivitynetworkanddatacenterintellectualproperty,supportingourOutperformratingand$14targetprice.DLR(Neutral,$130TargetPrice):Goinginto3Q18,weestimaterevenue/adj.EBITDA/AFFOStobe$769.3mil(+26.1%y/y)/$452.2mil(+27.4%$1.40(+2.6%y/y),respectively,belowconsensus’revenue/EBITDA/AFFOSestimateof$773.1mil/$453.9mil/$1.61,respectively.Areasoffocusonreportedfiguresandmanagementcommentarywillbeonupdatesregardingtheirrecentmanagementhires,theAscentyacquisition(seeournote,“DLR:SolidAscendIntoBrazilwithAscenty”),thecompany’sbacklogwhichwehighlightwasthehighestinitshistoryin2Q18,andthebacklogpipelinegoinginto4Q18and2019altogether.Otherareasoffocuswillbeinterconnectionrevenuemixandadditionalcommentaryaroundtheircloudon-rampdevelopmentswithIBM,ORCL,MSFT,andAMZN.COR(Neutral,$112TargetPrice):Goinginto3Q18,weestimaterevenue/adj.EBITDA/FFOStobe$138.0mil(+12.1%y/y)/$73.0mil(+11.9%y/y)/$1.21(-5.1%y/y),belowconsensus’revenue/adj.EBITDA/FFOSestimateof$138.1mil/$73.1mil/$1.24,respectively.ThelargestinvestordiscussionswehavehadonCORrevolvearoundthedatacenterdevelopmentpipelineofthecompanyandwhetherthatwillallowCORtogrowatorabovetheindustrygrowthrateof~9%CAGRthrough2021.Webelievethecompanymustspendthefullcapexguidancetoexceedinvestorexpectationsandwaittoseetheirfuturedevelopmentplansbeforereassessingourviewofthecompany.Additionally,anyrenewalspreadsof~2%orhigheronexistingleaseswouldberegardedfavorably,indicatingstrengthintheunderlyingbusinesscomparedtodatacenterpeersandintheirabilitytoexpandreturnsoninvestedcapital.QTS(Neutral,$42TargetPrice):Goinginto3Q18,weestimaterevenue/adj.EBITDA/AFFOStobe$103.8mil(-8.7%y/y)/$54.9mil(+3.7%y/y)/$0.50(-23.9%y/y),respectively,belowconsensus’estimatesof$57.2mil/$0.60respectively.Followingsolid2Q18earningsresultsandbroadsectorstrength,webelievethatthecompanyisfarbetterpositionedgoinginto2019comparedtoitstransitory2018yearthroughafullbusinessrestructuring.WebelieveQTSwillbeabletowinitsfairshareofhyperscaleleasesgivenitstargetROICyieldprofilesonselectleases.Giventhecompany’stransition,weremainreserveduntilwehavebettervisibilityonthefullcompetitivelandscapeandhyperscalecapexspendasweroundout2018.WereiterateourNeutralratingand$42targetprice.■■■3Data18OctoberKeyFigure1:CONETradingNearIts2-YearAverageof15.4xonP/FY2AFFOFollowingMarketSell-off Figure2:EQIX’sP/FY2AFFOTradingBelowIts2-YearAVGFollowingtheMarketSell-off P/FY2AFFOP/FY2Source:ThomsonEikon,CreditSuisseSource:ThomsonEikon,CreditSuisseFigure3:SWCHTradingAtItsYTDLowMultiple~15.7xEV/FY2 Figure4:DLRTradingNearIts2-YearAVGonP/FY2AFFOinAdditiontoSlightlyAboveItsPeerGroup EV/FY2P/FY2Source:ThomsonEikon,CreditSuisseSource:ThomsonEikon,CreditSuisseFigure5:CORFellBelowIts2-YearAVGonP/FY2FFODuringtheRecentMarketSell-off Figure6:QTSTradingBelowIts2-YearAVGonP/FY3AFFOAfterRecentMarketSell-off P/FY2Source:ThomsonEikon,Credit18OctoberKeyFigure1:CONETradingNearIts2-YearAverageof15.4xonP/FY2AFFOFollowingMarketSell-off Figure2:EQIX’sP/FY2AFFOTradingBelowIts2-YearAVGFollowingtheMarketSell-off P/FY2AFFOP/FY2Source:ThomsonEikon,CreditSuisseSource:ThomsonEikon,CreditSuisseFigure3:SWCHTradingAtItsYTDLowMultiple~15.7xEV/FY2 Figure4:DLRTradingNearIts2-YearAVGonP/FY2AFFOinAdditiontoSlightlyAboveItsPeerGroup EV/FY2P/FY2Source:ThomsonEikon,CreditSuisseSource:ThomsonEikon,CreditSuisseFigure5:CORFellBelowIts2-YearAVGonP/FY2FFODuringtheRecentMarketSell-off Figure6:QTSTradingBelowIts2-YearAVGonP/FY3AFFOAfterRecentMarketSell-off P/FY2Source:ThomsonEikon,CreditSuisseSource:ThomsonEikon,CreditSuisse4DataP/FY2AFFOP/FY2FFOEV/FY2EBITDAP/FY3AFFOP/FY2AFFOP/FY2AFFO18OctoberPositiveDespiteCurrentMixedOurchannelchecks18OctoberPositiveDespiteCurrentMixedOurchannelchecksforthequarterconsistsofmultipledataproviders'updates,realestatebrokercommentariesincoremarkets,andmeetingsanddiscussionswithcompanyexecutivesleavinguspositiveonthedatacentermarketin3Q18.Overall,ourtakeonthesectorremainspositivein3Q18,butslightlybehind2Q18recordbackloglevelsforsomeoftheMTDCs.Wedelveintoourcurrentcompany-specificoutlooksfor3Q18resultsinthebodyofthisnote.Figure7:CSDataCenterREITIndexContinuestoOutperformBoththeCSPublicCloudIndexandtheS&P500Index,butReturningMuchofits3-YearGainsinYTD2018 Source:Thomson5Data18OctoberFigure8:HyperscalerCapexGrowingat7.4%CAGRThrough2022EMTDCCapexGrowingat4.7%CAGRThrough2022E 0 MTDCHyperscaleSource:CreditSuisseestimates,ThomsonFigure9:HyperscalerCapexGrowingat7.4%CAGRThrough Source:CreditSuisseestimates,Thomson6DataTotalCapexExpendituresHyperscaleCapexincludesCapitalExpenditureinvestmentsintoofficespace,I.T.equipment,datacenterinfrastructure,land,andothermajorticketitems.Multi-TenantDataCenterCapexisinvestmentdirectlyintodatacenterinfrastructure,maintenancecapex,andland.Multi-TenantData18OctoberFigure8:HyperscalerCapexGrowingat7.4%CAGRThrough2022EMTDCCapexGrowingat4.7%CAGRThrough2022E 0 MTDCHyperscaleSource:CreditSuisseestimates,ThomsonFigure9:HyperscalerCapexGrowingat7.4%CAGRThrough Source:CreditSuisseestimates,Thomson6DataTotalCapexExpendituresHyperscaleCapexincludesCapitalExpenditureinvestmentsintoofficespace,I.T.equipment,datacenterinfrastructure,land,andothermajorticketitems.Multi-TenantDataCenterCapexisinvestmentdirectlyintodatacenterinfrastructure,maintenancecapex,andland.Multi-TenantDataCenter($ Equinix DigitalRealtyTrust QTSRealtyTrust CyrusOne CoreSiteRealty InterXionHolding Switch Internap TotalMulti-TenantDataCenter Y/Y %of Hyperscale($ Mercadolibre TotalHyperscale Y/Y %of HyperscaleCapexincludesCapitalExpenditureinvestmentsintoofficespace,I.T.equipment,datacenterinfrastructure,land,andothermajorticketitems.Multi-TenantDataCenterCapexisinvestmentdirectlyintodatacenterinfrastructure,maintenancecapex,andland.HyperscaleCapexEstimatedMTDCCapexEstimatedtoGrow+11.4%y/yin2018E18OctoberFigure10:Multi-TenantDataCenterMarketContinuestoSetNewRecords,NorthAmericanMarketsAbsorbed292MWin1H2018,Outpacing1H17by+33%1HNorthSource:CreditSuisseestimates,JLLFigure11:ForwardLookingMTDCTotalConstructionIndicating+10.1%(asof1H18)TotalCapacityComingOnlineThrough2018and1H19.Comparedto+5.4%TotalCapacityattheendof 1HFY1HNorthSource:CreditSuisseestimates,JLL7DataMWAbsorptionMWUnderConstruction/TotalMWInventoryAustinandSanLasVegas&Dallas/FortLasVegas&LosAustinandSanMinneapolis&St.GreaterMontrealNorthernNewNewYorkGreaterTorontoNorthernNorthernNorthwestGreaterMontrealNorthernNewWesternLosWesternNewYorkHongMinneapolis&St.LasVegas/RenoTorontoDallas/FortWrothNoVAPhoenixNorCalandNewJerseyMarketGrowthMuchLowerThanComparableMarketsChicagoMarketgrew38%in2017,butGrowthLookingMutedYear-to-date2018EDallasMarketgrew18OctoberFigure10:Multi-TenantDataCenterMarketContinuestoSetNewRecords,NorthAmericanMarketsAbsorbed292MWin1H2018,Outpacing1H17by+33%1HNorthSource:CreditSuisseestimates,JLLFigure11:ForwardLookingMTDCTotalConstructionIndicating+10.1%(asof1H18)TotalCapacityComingOnlineThrough2018and1H19.Comparedto+5.4%TotalCapacityattheendof 1HFY1HNorthSource:CreditSuisseestimates,JLL7DataMWAbsorptionMWUnderConstruction/TotalMWInventoryAustinandSanLasVegas&Dallas/FortLasVegas&LosAustinandSanMinneapolis&St.GreaterMontrealNorthernNewNewYorkGreaterTorontoNorthernNorthernNorthwestGreaterMontrealNorthernNewWesternLosWesternNewYorkHongMinneapolis&St.LasVegas/RenoTorontoDallas/FortWrothNoVAPhoenixNorCalandNewJerseyMarketGrowthMuchLowerThanComparableMarketsChicagoMarketgrew38%in2017,butGrowthLookingMutedYear-to-date2018EDallasMarketgrew139%in2017,GrowthLookingSolidBasedonConstructionTrendsin2018EPhoenixMarketgrew100%in2017vs.LookingtoBeat~30MWofAbsorptioninNoVaContinuestoExtenditsDataCenterLead,OnTracktoGrow50%+in2018Evs.201718OctoberFigure12:Tier1DataCenterMarketsGenerallyHaveImprovingPowerRatesandVeryLargeTotalDataCenterInventories Source:CreditSuisseestimates,JLLFigure13:…HelpingFueltheMulti-TenantDataCenter(MTDC)Market;ExpectedtoGrow~9%CAGROvertheNextFiveYearsfrom2017to2022;VirtualMultiplierReaching2.9xin2022 Source:I.H.S.Markit,CreditSuisse8DataExceptionstoTier1MarketTrend:LosAngelesandNorthernAveragePowerRates1HCSMarketLasVegas&LosAngeles18OctoberFigure12:Tier1DataCenterMarketsGenerallyHaveImprovingPowerRatesandVeryLargeTotalDataCenterInventories Source:CreditSuisseestimates,JLLFigure13:…HelpingFueltheMulti-TenantDataCenter(MTDC)Market;ExpectedtoGrow~9%CAGROvertheNextFiveYearsfrom2017to2022;VirtualMultiplierReaching2.9xin2022 Source:I.H.S.Markit,CreditSuisse8DataExceptionstoTier1MarketTrend:LosAngelesandNorthernAveragePowerRates1HCSMarketLasVegas&LosAngelesNewYorkCityNorthernCaliforniaNorthernVirginiaNorthwestU.S.GreaterTorontoAreaWesternCanada(Vancouver/18OctoberDataCenterBuildCostsBeginFallingRemainDataprovidedbyMetals&MiningSeniorAnalystCurtWoodworthindicatesthatdomesticsteelpriceshaveincreased~38%Y/Yandarelikelytoremainelevatedintheneartermwhichtranslatestohigherbuildcostsforthedatacenterproviders.Wenotethatalthoughallthemajordatacentersproviders(DLR,CONE,COR,QTS)haveaddressedthatthecurrentinflationaryenvironmentsurroundingconstructioncostshaveyettoimpacttheirfinancials,wedoseethisasanetnegativeforthesector.Priceshavebeguntofallbutremainwelloverthepricesseenthroughout2017.Figure14:KeySteelMarketData;HotRolledCoil(HRC)PricesareaProxyForDomesticSteel Source:AMM,AISI,theBLOOMBERGPROFESSIONAL™service,CreditSuisse9DataU.S.SteelPHRC18OctoberDataCenterBuildCostsBeginFallingRemainDataprovidedbyMetals&MiningSeniorAnalystCurtWoodworthindicatesthatdomesticsteelpriceshaveincreased~38%Y/Yandarelikelytoremainelevatedintheneartermwhichtranslatestohigherbuildcostsforthedatacenterproviders.Wenotethatalthoughallthemajordatacentersproviders(DLR,CONE,COR,QTS)haveaddressedthatthecurrentinflationaryenvironmentsurroundingconstructioncostshaveyettoimpacttheirfinancials,wedoseethisasanetnegativeforthesector.Priceshavebeguntofallbutremainwelloverthepricesseenthroughout2017.Figure14:KeySteelMarketData;HotRolledCoil(HRC)PricesareaProxyForDomesticSteel Source:AMM,AISI,theBLOOMBERGPROFESSIONAL™service,CreditSuisse9DataU.S.SteelPHRC-US,do HRC-US,Import --GlobalSteelPHRC-EUdomestic HRC-ChinaExport(FOB --EAFMetalUSHRCMetal -US-GlobalP -RawMaterialPUSPigIronImportGulfCoast IronOreFines62%(CFRChina) USShreddedscrap-Midwest PremiumHCC-Aus HCC-Aus PremiumHCC-China ------Nov-17Dec-17Jan-18Feb-18Mar-18Apr-18May-18Jun-18Jul-18Aug-18Sep- Spo M/ Y/18OctoberISGIndexReportsCombinedMarketAnnualContractValue(ACV)Growthof+18%y/yinOnOctober10th,2018,InformationServicesGroup(ISG)publishedthe3Q18ISGIndex(seedetails),whichprovidesareviewofthelatestsourcingindustrydataandtrends.Overall,theindexdataimpliesstronggrowthacrossbothtraditionalandas-a-servicesourcing,whichisanet-positivefordatacenters.TheindexreportedthatACVin2Q18reachedarecordquarterlyhighof$11.7bn(+18%y/y)vs.$12.5bn(+30%y/y)in2Q18;withas-a-servicereaching$5.7bn(+46%y/y)vs.$5.5bn(+53%y/y)in2Q18andtraditionalsourcingreaching$6.0bn(+0%y/y)vs.$7.0bn(17%y/y)in2Q18.Weviewthese3Q18growthratesasdemonstratingashifttowardsgreateras-a-servicesourcingandcontinuinggrowthwhichwillbenefitdatacentercompanies.ISGreportsthattheas-a-servicesegmentcontinuestoseestrongpubliccloudinfrastructuregrowthrates.ISGdescribestheglobalsourcingmarketasstrongandsustained.WenotethatthisresearchreinforcesindustryresearchbyI.H.S.Markitfromearlierthisyearwhichindicatedthatcompaniesexpecttoincreasespendinboththepublicandprivatecloudspace.Figure15:18OctoberISGIndexReportsCombinedMarketAnnualContractValue(ACV)Growthof+18%y/yinOnOctober10th,2018,InformationServicesGroup(ISG)publishedthe3Q18ISGIndex(seedetails),whichprovidesareviewofthelatestsourcingindustrydataandtrends.Overall,theindexdataimpliesstronggrowthacrossbothtraditionalandas-a-servicesourcing,whichisanet-positivefordatacenters.TheindexreportedthatACVin2Q18reachedarecordquarterlyhighof$11.7bn(+18%y/y)vs.$12.5bn(+30%y/y)in2Q18;withas-a-servicereaching$5.7bn(+46%y/y)vs.$5.5bn(+53%y/y)in2Q18andtraditionalsourcingreaching$6.0bn(+0%y/y)vs.$7.0bn(17%y/y)in2Q18.Weviewthese3Q18growthratesasdemonstratingashifttowardsgreateras-a-servicesourcingandcontinuinggrowthwhichwillbenefitdatacentercompanies.ISGreportsthattheas-a-servicesegmentcontinuestoseestrongpubliccloudinfrastructuregrowthrates.ISGdescribestheglobalsourcingmarketasstrongandsustained.WenotethatthisresearchreinforcesindustryresearchbyI.H.S.Markitfromearlierthisyearwhichindicatedthatcompaniesexpecttoincreasespendinboththepublicandprivatecloudspace.Figure15:Combined(Public+Commercial)AnnualContractValueGrowingat~8.3%CAGRfrom‘14-‘18Figure16:Financial&BusinessServicesSegmentsGrowingFastestat~18.3%CAGRfrom‘15-‘18Source:ISGIndex,CreditSuisseSource:ISGIndex,CreditSuisseData18OctoberFigure17:CreditSuisseCommunicationsInfrastructureComp Source:Companydata,CreditSuisseestimates,ThomsonDataBasicCompany/ TickerPriceCurrentMarketNetDebtEV RatingCap 18OctoberFigure17:CreditSuisseCommunicationsInfrastructureComp Source:Companydata,CreditSuisseestimates,ThomsonDataBasicCompany/ TickerPriceCurrentMarketNetDebtEV RatingCap $32,462 $42,946 Digital CoreSite QTS DataCenterREITs $5,008 $3,312 GDS Non-REITDataCenters $236,523$177,794 222,959 T- U.S. Telecoms $91,473$59,625 61,246$226,196 Liberty $46,859 Limelight LLNW $22,845 Cogent Comm.Infra. $5,481 CreditSuisseDefinedTMT $24,046 18OctoberDataCenterCyrusOneInc.Targetprice(US$)Marketcap(US$m)68.63-Strong3Q18ResultsEnterprisevalue(US$ 18OctoberDataCenterCyrusOneInc.Targetprice(US$)Marketcap(US$m)68.63-Strong3Q18ResultsEnterprisevalue(US$ CreditSuisse3Q18Estimates;ResultsonOctober31st,2018:Goinginto3Q18,weestimaterevenue/adj.EBITDA/AFFOStobe$218.7mil(+24.8%revenue/adj.EBITDA/AFFOSestimatesof$208.4mil/$114.1mil/$0.80respectively.WereiterateourOutperformratingand$73targetKeyMetricsofFocus:Areasoffocusincludereportedfiguresandmanagementcommentaryonupdatesregardingthesalesforcesalesfunnel,numberofnewleasessigned,updatedbacklogthatwillinclude3Q18CONEandtotalZeniumsignings,percentageofrecurringrevenuefromexistingcustomers,thenumberofFortune1,000companyadditionsinthequarter,aswellasanyrevenue/EBITDA/AFFOguidanceupdatestoFY2018figures.WebelievethatCONEisinpositiontosetanotherrecordbacklog(2Q18backlogwas$85mil)in3Q18followingtheZeniumacquisitionandhyperscalecapexspendingmomentumobservedYTD2018.SentimentMixedGoingInto3Q2018EarningsResults:Following1Q18earningsresultsandthroughthe2Q18period,acceleratedhyperscaleCapexdrovematerialleasingvolumetokeywholesaleproviders,CyrusOne(CONE)andDigitalRealty(DLR);however,followingequityissuancestofundfuturedevelopmentandM&Aactivity,investorappetitehasbeenmixedonthegroupasawholegiventhedilutionofsharesissuedintothemarketandrisinginterestrates.Onbalance,wecontinuetoseehealthydatacenterleasingactivitygoingintothebackhalfof2018,drivenbycontinuedcloudgrowth,hybridenterprisecloudshifts,andoveralldemandfornextgenerationapplicationenablement.ValuationUnchanged—Outperform,$73TargetPrice:WereiterateourOutperformratingandtargetpriceof$73,basedonanaverageoffivevaluationmethodologiesincludingaP/AFFOmultiple,anEV/EBITDAmultiple,anetassetvaluemethod,adiscountedcashflowmodel,andadividendyield■Sami212538Michael212325■■■SharepriceFinancialandvaluationNormalizedFFO/Share-AdjustedFFO/Share(US$)P/AFFO(US$m)AFFOPayoutRatio%EBITDAMargin%Revenue(US$m)On17-Oct-2018theS&P500INDEXclosedat2805.47DailyOct17,2017-Oct17,2018,10/17/17=Adjusted NetDebt-to-EBITDAEnterpriseValue 0.86Source:Companydata,ThomsonReuters,CreditSuisse 0.83 1.01Data18OctoberFigure18:CreditSuisseEstimatesvs.ConsensusEstimatesandCompanyProvided Source:Companydata,CreditSuisseestimates,ThomsonDataCyrusOne,Inc.(inCreditCreditCreditCreditTotaly/y18OctoberFigure18:CreditSuisseEstimatesvs.ConsensusEstimatesandCompanyProvided Source:Companydata,CreditSuisseestimates,ThomsonDataCyrusOne,Inc.(inCreditCreditCreditCreditTotaly/y$820-AdjustedEBITDAAdj.EBITDAMarginy/ygrowth$454-Norm.FundsfromOperationsy/yNorm.FFOpery/yAdjustedFundsfromOperationsy/yAFFOpery/yCapexas%ofSalesy/ygrowth$850-18OctoberDataCenterEquinix,Inc.Targetprice(US$)"InvestmentYear"StillIn52-weekpricerange(US$)492.98-Marketcap(US$Enterprisevalue(US$ 18OctoberDataCenterEquinix,Inc.Targetprice(US$)"InvestmentYear"StillIn52-weekpricerange(US$)492.98-Marketcap(US$Enterprisevalue(US$ CreditSuisse3Q18Estimates;ResultsonNovember1st,2018:Goinginto3Q18,weestimaterevenue/adj.EBITDA/AFFOStobe$1.28bn(+11.2%y/y)/$599.3mil(+8.9%y/y)/$5.03(+1.1%y/y),respectively,inlinewithconsensus’estimatesof$1.28bn/$598.6mil/$4.86andwithinthecompany’sprovidedguidancerange.WeanticipateFY18revenue/adj.EBITDA/AFFOStobe$5.07bn(+16.1%y/y)/$2.41bn(+17.3%y/y)/$20