Infrastructure assets for the digital economy – data centres

Gary Rollo


Technology was once a major competitive advantage for large companies, today that’s no longer the case, smaller companies can now compete on a level technology playing field thanks to Cloud Computing and the Digital Economy. It’s why we believe that small companies represent an attractive area for investing.

In the Montgomery Small Caps Management Video Series, I talk with companies we own in the fund to help investors get under the hood of the small and emerging companies we invest in.

Today we have Craig Scroggie, Chief Executive Officer of NEXTDC (ASX:NXT). NEXTDC is a powerful structural growth story. Their infrastructure is behind some of the brand names that power the internet. The company was founded in 2010 to build a national network of carrier and vendor neutral data centres around Australia. They have a relatively small share of the market, approximately 10-12 per cent. The rate of growth today on public and private cloud numbers that are being forecast are just astronomical.

In this video, you will learn about the business model, what a data centre operator actually is, the relevance of cloud computing and the big picture drivers of this business.

“I think the first thing to recognize is that data centres are an infrastructure asset. They are a capital-intense piece of infrastructure. We don’t directly compete against an organization like a Microsoft or Amazon. They’re essentially, for us, an important customer or a partner and we’re helping them build the global scale that they need in their infrastructure platform to deploy their computing services.” Craig Scroggie

We like NEXTDC’s combination of exposure to strong growth themes, management with a proven track record of developing high quality assets and making good returns. The quality and duration of the company assets, the upcoming completion of the S2 data centre project and the scope for considerable valuation growth over time should act as significant catalyst for future growth

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Gary  Rollo
Portfolio Manager

Gary is the Portfolio Manager of the Montgomery Small Companies Fund – a small-cap Australian equity fund investing in 30 to 50 high quality, undervalued small and emerging companies with strong growth potential. The fund invests outside the ASX100.

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