COVID-19 Affects GDS Holdings in the Short Term but We Remain Positive on the Long Term

No-moat GDS Holdings reported a reasonable first-quarter 2022, with revenue up 31.5% and adjusted EBITDA up 28.5% year on year. The mild margin contraction is in line with management comments and guidance at the 2021 result that 2022 margins would be reduced due to thermal coal-generated electricity price increases in China with around 50% of its contracts not having full power cost pass through. Management retained its guidance for 2022 total revenue to grow between 19% and 24% to CNY 9,320 million-CNY 9,680 million, and for adjusted EBITDA to grow between 16% and 20% to CNY 4,285 million-CNY 4,450 million. Management also retained 2022 capital expenditure guidance of around CNY 12 billion with CNY 6 billion expected for organic growth in China, CNY 2 billion for Southeast Asia, and CNY 4 billion set aside for acquisitions.