Media stock under pressure: 21Vianet Group Inc – ADR (NASDAQ: VNET)

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21Vianet Group Inc – ADR (NASDAQ: VNET) stock lost over 7.7% on March 5th, 2020 (Source: Google finance) on lower than expected performance. Adjusted EBITDA margin had fallen to 25.2%, compared to 28.3% in the same period of 2018. The company has generated net cash from operating activities of RMB444.8 million (US$63.9 million), compared to RMB237.0 million in the same period of 2018.

The company in the fourth quarter of FY 19 has reported 16.2% increase in the net revenues to RMB1.05 billion (US$150.6 million) from RMB901.9 million in the same period of 2018. The year-over-year increase in revenue in mainly driven by the growing demand for data centers in the domestic market, due to the ongoing expansion of corporate digitization across China. There has been 4.1% rise in the adjusted cash gross profit to RMB425.9 million (US$61.2 million) from RMB409.2 million in the same period of 2018. Adjusted cash gross margin had fallen to 40.6%, compared to 45.4% in the same period of 2018. Adjusted EBITDA (non-GAAP) grew by 3.3% to RMB263.8 million (US$37.9 million) from RMB255.3 million in the same period of 2018. Moreover, the company had signed a memorandum of understanding with an industry-leading wholesale customer, which marked a significant milestone for the company and illustrating the attractiveness of the IDC services for large-scale clients. Further, during the fourth quarter, the company has experienced strong demand from the retail customers for both scalable space and turn-key hybrid IT solutions. Going forward, the company is focused on securing additional pipeline resources in key markets, upgraded the technology on a continual basis, and ensuring the reliability of operations to provide customers with premium IDC services.

Meanwhile, in February 2020, the Company had signed convertible note purchase agreements with a group of investors led by Goldman Sachs Asia Strategic Pte. Ltd., for a total value of US$200 million in convertible notes. These agreements depend upon the satisfaction of customary closing conditions.

For the first quarter of 2020, the Company expects net revenues to be in the range of RMB1,070 million to RMB1,090 million. Adjusted EBITDA is expected to be in the range of RMB245 million to RMB265 million.

For the full year of 2020, the Company expects net revenues to be in the range of RMB4,600 million to RMB4,800 million. Adjusted EBITDA is expected to be in the range of RMB1,250 million to RMB1,350 million. The midpoints of the Company’s updated estimates represent an increase of 24% year over year both in net revenues and adjusted EBITDA.

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