Equinix, Inc. (EQIX US): Soft Guidance but Secular Growth Trends Intact
Equinix, Inc. delivered another solid quarter, marking its 88th consecutive quarter of revenue growth. For Q4 2024, revenue increased 7% year-on-year (YoY) to USD 2,261 million, supported by record gross bookings, firm pricing trends, and strong xScale momentum. Adjusted EBITDA rose 11% YoY to USD 1,021 million, with diluted adjusted funds from operations per share (AFFOPS) increasing by 9% YoY to USD 7.92. For FY24, AFFOPS also grew 9% to USD 35.02, slightly below the forecasted SGD 35.16.
Looking ahead to FY25, Equinix has guided for AFFOPS of USD 36.69-USD 37.51, representing growth of 5-7% on a normalized and constant currency basis. However, this guidance is slightly below consensus expectations. Revenue is expected to range between USD 9,033 million and USD 9,133 million, with adjusted EBITDA projected between USD 4,386 million and USD 4,466 million, translating to an adjusted EBITDA margin of approximately 49%.
Equinix continues to benefit from secular growth drivers such as artificial intelligence (AI) and high-performance computing. Management highlighted diversification in AI use cases across verticals like finance, healthcare, and gaming. The decline in inferencing costs driven by developments in open-source AI platforms is expected to broaden the adoption of AI, further boosting demand for Equinix’s services.
Financially, the company maintained a strong position, reducing its net leverage ratio from 3.5x to 3.4x. Liquidity increased to USD 7.5 billion, and the issuance of EUR 1.15 billion in green notes brought the total to USD 6.9 billion in green financing. After fine-tuning assumptions, the fair value (FV) estimate for Equinix was revised upwards from USD 991 to USD 1,035, supported by an upgraded ESG rating. OCBC Investment Research reiterates its BUY rating.
Seatrium Limited (STM SP): Double Happiness
Seatrium Limited has been riding a wave of positive momentum, evidenced by a 10.9% surge in its share price on February 13, 2025. The catalyst was the announcement of a Memorandum of Understanding (MOU) with BP Exploration & Production Inc. (BP) for the construction of the Tiber floating production unit (FPU) in the US Gulf Coast. The contract is contingent on BP’s final investment decision expected later this year. This marks Seatrium’s second collaboration with BP, following the Kaskida FPU project announced in December 2024.
Seatrium’s robust order book has been further strengthened by a contract with Penta-Ocean Construction for the engineering, procurement, and construction of a 5,000-ton heavy lift vessel. These developments align with the Trump administration’s push for US energy dominance, which could drive higher capital expenditures by global oil and gas majors.
Financially, Seatrium is expected to show improved gross margins with the completion of two legacy projects in US shipyards by the end of 2024. The company’s FY24 results, due on February 21, 2025, are anticipated to provide further clarity. The fair value estimate has been raised from SGD 2.64 to SGD 2.82, based on a 12-month forward price-to-book multiple of 1.35x. OCBC Investment Research maintains a BUY rating, citing potential upside surprises in the order book.
Sea Limited (SE US): Up, Up, and Away
Sea Limited continues to impress, with a 25.5% year-to-date surge in its share price. Expectations of strong Q4 2024 results, driven by holiday shopping seasonality, have buoyed market sentiment. Shopee, Sea’s e-commerce arm, appears well-positioned amidst tariff uncertainties that have impacted competitors like Pinduoduo’s Temu and TikTok.
While TikTok faces operational challenges in the US due to regulatory issues, Shopee is poised to capture a larger market share in Southeast Asia. Sea’s earlier investments in logistics, ad systems, and user experience are expected to pay off, enhancing its competitive edge.
Sea’s fair value estimate has been revised upwards from USD 135 to USD 154, reflecting stronger e-commerce growth projections. The company’s digital financial services (DFS) segment has also outperformed expectations, now ranking as its second-largest revenue contributor. Favorable FY25 guidance could serve as an additional catalyst. OCBC Investment Research reiterates its BUY rating on Sea Limited.
