GDS Holdings (GDS.O; 9698.HK) – Leading operator of data centers in China and Southeast Asia

GDS’ stock has been dragged down by weak growth in China and an overextended balance sheet, but management is on track to achieve positive cash flow and a rebound in share price

This brief is co-authored with @valuesalon, a former PE analyst with deep China internet and data center experience.

GDS Holdings (GDS.O; 9698.HK) (“GDS”) is an owner and operator of data centers in China and Southeast Asia, with a market cap of about USD 1.75 billion (USD 9.50 per ADS as of 17 May 2024 market close). In this brief, we explain how GDS’ share price could improve to above USD 14 if management can improve data center utilization, generate free cash flow and de-leverage debt. Favorable macro tailwinds (e.g. easing of geopolitical tensions, generative AI-driven cloud demand, and recovery of onshore financial markets) could further drive a valuation re-rating.