GDS Looking to Benefit From Chinese Artificial Intelligence Demand

We expect GDS Holdings to continue to purchase and build data centers in and around its focus Tier 1 Chinese cities of Shanghai, Beijing, Shenzhen, Guangzhou, Hong Kong, Chengdu, and Chongqing. As its network of interconnected data centers grows it can more easily cater to the demand from its key cloud service provider customers allowing them to expand in a flexible way in their key markets. This also enables key enterprise customers to deploy their hybrid clouds in close proximity to the networked nodes of leading public clouds. The company is also excited about its international expansion into Southeast Asia, but in raising funds for the growth of this business, named DayOne, it has sold down its stake to 38% and has now deconsolidated this business. Note the most recent capital raise would value GDS' stake at USD 1.3 billion or USD 6.75 per ADR on a USD 400 million investment. We believe an IPO of this business is a possibility within the next 18 months. The creation of a listed REIT seeded by some of GDS' mature Chinese data centers is also being considered.