GDS Holdings Ltd

HKEX:9698

Earnings Call Analysis

GDS Holdings reports strong Q3 growth driven by AI demand and international expansion.

In Q3 2024, GDS Holdings achieved 18% revenue growth and a 15% boost in adjusted EBITDA, owing largely to increased AI demand. The company saw a record 25,000 square meters of new area utilized, with expectations of 60,000 square meters for the entire year, mirroring 2020's peak. To support this growth, GDS raised its 2024 CapEx guidance to RMB 11 billion, allocating RMB 3 billion for China and RMB 8 billion for international expansion. The future looks promising as GDS plans to build substantial capacity in Thailand, aiming for 120 megawatts. Amidst these opportunities, management remains focused on stabilizing operations while maximizing shareholder value.

Robust Revenue Growth Amid Market Challenges

In the third quarter of 2024, GDS Holdings demonstrated impressive growth, recording an 18% increase in revenue and a 15% rise in adjusted EBITDA compared to the previous year. This performance is particularly noteworthy given the current market challenges, highlighting the successful turnaround of their China operations and the implementation of their international strategy.

Record Move-in Rates Fueled by AI Demand

The company reported the highest move-in rate to date, with over 25,000 square meters of gross additional area utilized in Q3 '24, primarily driven by increasing demand for AI services. Approximately 50% of this figure came from new orders, while the rest was from earlier backlogged orders. For the full year of 2024, GDS anticipates utilizing around 60,000 square meters, matching their peak figures from 2020.

Future Prospects Tied to AI and New Market Strategies

GDS expects sustained growth in the AI sector, particularly for machine learning and inference applications, which require Tier 1 market deployments. Their strategy now includes a more aggressive expansion plan to capitalize on these trends, signaling a shift towards higher investments and growth opportunities.

International Ventures and the Thailand Opportunity

The company has officially entered the Thailand market, a move seen as strategic due to the country's growing digital economy and ongoing government support for foreign investments. GDS has acquired land for a data center campus with an aim to develop 120 megawatts of total IT power capacity, targeting both domestic demand and potential to become another data center hub in Asia.

Capital Expenditure Guidance Revised

Initial expectations for 2024 China CapEx were around RMB 2.5 billion, but this has been revised to approximately RMB 3 billion, reflecting higher move-in activity. For international ventures, CapEx guidance has doubled to around RMB 8 billion, aligning with the rapid expansion plans in response to increasing global demand.

Reaffirming Financial Stability and Strategy

Despite the increased capital expenditure, GDS aims to maintain a positive cash flow before financing, targeting a positive outcome for the full year 2024. The company aims for a consistent approach to their growth strategy, balancing between maintaining financial stability while exploring new investment opportunities to leverage AI-centred growth.

Challenges in EBITDA Margins Amid Infrastructure Costs

GDS observed a slight decline in adjusted EBITDA margins owing to increased power tariffs from the previous year. The company anticipates continued pressure on margins, projecting a slight reduction in market rental rates over the next year, but expects to achieve revenue growth in the high single digits through targeted strategies.

Market Differentiation and Future Outlook

GDS remains committed to leveraging its competitive advantages in land and power resources in major Chinese cities to meet hyperscale demand. Management believes that upcoming infrastructure expansions will align with AI developments and that their thorough planning will facilitate steady revenue based on existing customer commitments.

Earnings Call Transcript 2024-Q3

[Operator]

Hello, ladies and gentlemen. Thank you for standing by for GDS Holdings Limited Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded.

I will now turn the call over to your host, Ms. Laura Chen, Head of Investor Relations for the company. Please go ahead, Laura.

[Laura Chen, executive]

Thank you. Hello, everyone. Welcome to the Third Quarter 2024 Earnings Conference Call of GDS Holdings Limited. The company's results were issued via Newswire services earlier today and are posted online. A summary presentation, which we will refer to during this conference call, can be viewed and downloaded from our IR website at investors.gds-services.com.

Leading today's call is Mr. William Huang, GDS Founder, Chairman and CEO, who will provide an overview of our business strategy and performance. Mr. Dan Newman, GDS CFO, will then review the financial and operating results.

Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the company's prospectus as filed with the U.S. SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law.

Please also note that GDS earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. GDS press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.

I will now turn over -- turn the call over to GDS Founder, Chairman and CEO, William. Please go ahead, William.

[William Huang, executive]

Okay. Thank you. Hello, everyone. This is William. Thank you for joining us on today's call. In 3Q '24, we achieved revenue growth of 18% and adjusted EBITDA growth of 15% year-on-year. This growth rate is quite remarkable in current market conditions. It reflects the progress we have made in turning around our China business, plus the uplift from the successful execution of our international strategy.

From the beginning of this year, the move-in rate has clearly stepped up. In 3Q '24, gross additional area utilized was over 25,000 square meters. It is the highest level we have ever achieved. It is all organic and all in Tier 1 markets. The main reason for this improvement is AI demand. About half of the move-in is coming from the recent new orders and half from orders which have been in the backlog for a longer time.

For the full year of 2024, we expect net additional area utilized of around 60,000 square meters, which is similar to our peak year of 2020. Looking forward, we have better visibility on the deployment plans of our customers, which gives us a high level of confidence. Therefore, we expect this level of move-in to be sustained.

The first wave of AI demand is for machine learning. For this use case, customers can deploy in remote area where land and power are available. The second wave of AI demand is for inferencing. For this use case, customers must deploy in the Tier 1 markets. This has been confirmed with our customers in multiple communications. So far, the volume of AI new orders in Tier 1 market is quite small. Customers are typically looking for move-in ready capacity. This fits with our current sales strategy, which is target order which match our inventory. In the coming year, we expect AI deployments in Tier 1 markets to increase in scale. This will help bring the market back into balance.

Some of the new demand will be for hyperscale campuses. We are uniquely well positioned for this. We have large blocks of land and power at diverse sites around Beijing, Shanghai and Shenzhen, Guangzhou. This kind of the resource is scarce. In order to capture the AI wave in Tier 1 markets, we will carefully consider sales opportunities, which require us to initiate new deployments. This is a more expansionary business plan with higher investment and higher growth. It goes hand-in-hand with the execution of our China REIT strategy.

We made a decision to establish our international business as a stand-alone entity. We believe that this approach will maximize value for our shareholders. The vision for GDSI is to become a leading international data center platform. We pioneered the creation of new markets to fulfill AI demand. As of 3Q '24, we have 431 megawatts of total customer commitments. The sales pipeline is very strong. During the third quarter, we signed a contract with a new customer, which is a leading global tech company for capacity at our campus in Batam; 34 megawatts is committed and 38 megawatts is reserved.

This is the first data center of its kind in Asia designed for the most advanced AI technology. The ramp-up is very fast. We already delivered the first phase in the past few days. It's an incredible achievement by our management and the perfect illustration of how we are able to create new markets.

During the current quarter, we officially entered into another new market, Thailand. We are the first data center hyperscale -- we are the first data center operator to undertake the first hyperscale project in Thailand. We received strong support from the Thailand government. We think this is the next big opportunity in Southeast Asia. In the past few months, all the global tech leaders have announced a large investment plan in Thailand. We have acquired the land for a data center campus in Chonburi province near Bangkok, which is the focus area for hyperscale deployment.

We plan to develop around 120 megawatts of total IT power capacity on our first land site. We expect to serve the domestic demand for Thailand's fast-growing digital economy. We are very confident to make Thailand another success story.

I will now pass on to Dan for the financial and operating review.

[Daniel Newman, executive]

Thank you, William. I'll run through the China segment first, followed by international.

Starting on Slide 16. In 3Q '24, GDSH segment revenue increased by 6.1% and adjusted EBITDA increased by 3.6% year-on-year. GDSH revenue growth was mainly driven by an increase in total area utilized of 11.6% year-over-year. MSR per square meter has declined moderately over the past 4 quarters. Adjusted EBITDA margin for 3Q '24 versus 3Q '23 was down by 1 percentage point. The main reason for this is the increase in power tariffs, which occurred during the second half of last year. Looking forward, we expect net additional area utilized to continue at around 15,000 square meters per quarter. We expect MSR to decline slightly over the next year and assume that power tariffs remain at current levels.

For the first 9 months of 2024, our China CapEx totaled RMB 2.6 billion. We originally guided for around RMB 2.5 billion for the full year. However, as we had higher move-in, we had to bring forward a small amount of CapEx. As a result, we are revising up our China CapEx guidance to around RMB 3 billion for 2024. In our base case business plan for next year, we envisage China CapEx within the RMB 2 billion to RMB 3 billion range.

For the first 9 months of 2024, cash flow before financing for GDSH is negative RMB 293 million. The fourth quarter of the year is usually a good quarter for collections. Therefore, we expect the cash flow before financing for the full year to be positive. This is in line with our financial target. This remains a key financial objective to deliver steady growth while generating positive cash flow before financing.

As shown on Slide 20, at the end of 3Q '24, the cash balance of GDSH decreased to RMB 7.8 billion, and the net debt to last quarter annualized adjusted EBITDA multiple was 7.4x. Over 60% of our gross debt is RMB-denominated project term loans. The interest on these loans is floating rate linked to the over 5-year LPR. This benchmark came down by 25 basis points at the end of 3Q '24 to see some benefit as our interest cost resets.

As William mentioned, we are fully committed to establishing a China REIT. This [Technical Difficulty] strategy for a number of reasons: one, it will give us continued to [Technical Difficulty] with a lower cost of equity; two, it will increase our liquidity and enable us to accelerate deleveraging; three, it will provide us with an additional source of capital to capture attractive new sales opportunities as AI demand takes off; and four, it will benchmark the valuation of stabilized data centers in China and give us the means to recycle capital on an accretive basis.

We are approaching China REITs with 2 transactions in parallel. The first involves the creation and IPO of a listed C-REIT, which holds stabilized data centers. The second involves the creation of asset-backed securities, ABS, which holds ramping up data centers. The ABS is the former security, which can be injected into a C-REIT once the underlying data centers are stabilized. Hence, we call the ABS a pre-REIT.

For the C-REIT, we have already completed a very thorough review process at provincial level. Our application is now subject to a national level review by NDRC, CSRC and the Shanghai Stock Exchange. We are aiming to obtain all the necessary approvals by the middle of next year. This would create the possibility of launching the C-REIT in the second half of 2025. For the purposes of listing, we selected one large site, which fits the typical C-REIT offering size of around RMB 2 billion. However, once established, we would intend to [ inject ] additional data centers if it creates shareholder value. Currently, C-REITs are trading on significantly higher multiples than the current implied multiple for our China business.

For the pre-REIT, we are at the final stage obtaining all the necessary approvals. The pre-REIT delivers many of the same benefits as the C-REIT, but it's a one-off transaction. We're trying to get it done as soon as possible.

Turning to the International segment on Slide 23. In 3Q '24, GDSI revenue increased by 42% and adjusted EBITDA increased by 15% quarter-on-quarter. Currently, we have around 103 megawatts of IT power utilized. As the delivery schedule for most of the backlog is very short and customers undertake to move in quickly, we expect to have around 400 megawatts of utilized capacity within the next 18 months.

For the first 9 months of 2024, international CapEx was around RMB 4 billion. We originally guided RMB 4 billion for the full year. But due to the extraordinary ramp-up, we now expect full year CapEx for international to be around RMB 8 billion.

Turning to Slide 29. On 29th of October, we announced that GDSI has raised USD 1 billion from the issue of Series B convertible preferred shares. The issue is expected to close by the end of the year. Post closing and on an as-converted basis, GDSH will own approximately 37.6% of GDSI. The value of our equity interest implied by the Series B subscription price is approximately USD 1.3 billion, representing a 75% premium over the Series A valuation and equivalent to approximately $6.75 per GDS ADS.

The private equity valuation of data centers is typically based on the sum of installed capacity, contracted backlog and near-term sales pipeline. As GDSI ramps up its installed capacity, wins new orders and adds to its supply of [ high remarkable ] capacity, we expect the equity valuation to increase significantly. In this round, we aim to secure enough capital to build and deliver over 1 gigawatt of capacity. Including the sale of the proceeds of Series B, we will have USD 2.1 billion of equity. With the addition of a moderate amount of mezzanine debt, we should be able to achieve our 1 gigawatt target.

Post closing, GDSH will deconsolidate GDSI. However, we will continue to disclose enough key information for you to track GDSI's performance. To ensure that the value of our equity investment accrues to GDSH shareholders, our plan A is to IPO and spin off GDSI. We will give you a better sense of the timing on our next earnings call.

Finishing on Slide 30. We are maintaining our formal guidance for FY '24 consolidated revenue and adjusted EBITDA. However, as I mentioned before, we are raising our CapEx guidance to RMB 11 billion, which includes RMB 3 billion for China to support the faster move-in and RMB 8 billion for international, reflecting its accelerated expansion.

We would now like to open the call to questions. Operator?

[Operator]

[Operator Instructions] First question is from the line of Yang Liu from Morgan Stanley.

[Yang Liu, analyst]

I have one question about the China strategy. First, we saw pretty strong demand, good move-in and good booking. At the same time, we saw the upward revision of the CapEx. Is that a pull forward of the previous plan 2025 or 2026 China CapEx or is that new? And you have just mentioned that the China future investment will be linked to the REIT strategy in China. Does it mean that if you deliver the REIT listing, then you can invest more aggressively in China. Without REIT, you're still in a tight control mode of the CapEx. Does it mean this kind of...

[William Huang, executive]

Yes. Yang Liu, I think number one, we still stick on our previous strategy, try to stabilize our business in China and maintain the -- let's say, the growth organically, right, and digest our inventory. This is our first priority. But in the meanwhile, we always [indiscernible] we selected to do the new business, that means a very high-quality business. But of course, we are currently in a [ Tier 2 ] recycle capital in an efficient way and then create more value for our shareholders.

In the meanwhile, if we can get -- we can do recycling capital in a sufficient way in the future, then we will start to more aggressive to take some new order, seeking the growth again. Yes, this is -- I think we try to make the growth and stabilize more balance in the future.

[Operator]

We'll now take our next question. This is from the line of Jonathan Atkin from RBC.

[Jonathan Atkin, analyst]

Couple of questions. If you can maybe talk a little bit about the development in the [indiscernible] market, it's happening more rapidly than I would have expected. Do you expect there to be a lot of kind of smaller Internet enterprise demand or will it largely be largest deployment of the type that you've recently got commitments for?

And then secondly, on GDSI, can you talk about the ongoing financial commitment that GDS would have...

[Laura Chen, executive]

Jon, your line is not that clear.

[Daniel Newman, executive]

I think the first question was about the kind of demand that -- was Jon talking about Batam. So what kind of customers interested in Batam, I think Jon was asking.

[William Huang, executive]

Yes. Okay. Let me answer the first question, in Batam, we still view it as SIJORI data center hub. I think this -- whatever in Johor or Singapore or Batam, all the customer, hyperscale customer, whatever from the U.S. or domestic or China, all very interested in Batam. So far, we have a very strong pipeline from the different country.

[Jonathan Atkin, analyst]

Yes, ongoing commitment to GDS International and GDS Holdings.

[Daniel Newman, executive]

Yes. Okay. On that one, I think we can be clear that the decision was made, I think, at the beginning of last year that we would cap -- our allocation of capital to international at the level then was around $400 million. And in the course of the Series A capital raising, actually part of the use of proceeds was to repay some shareholder loans from GDSH to GDSI to bring that number back down to the $400 million level that we had established as our limit in terms of capital allocation.

So from that point forward, our motivation is to make our $400 million investment as valuable as possible. Based on the Series B price, we've turned that $400 million into $1.3 billion of value. And I personally think that it will continue to increase at a rapid rate. Every shareholder of international has preemption rights, but we don't expect that GDS Holdings will exercise preemption rights in future. So GDS Holdings portion will be available for allocation to other investors, particular investors who can add value to the international business.

[Jonathan Atkin, analyst]

And then lastly, the Singapore [ PSA ] process, Equinix just announced within the past hour or so some progress on their -- what they're going to be doing with their build. What is your visibility around timing, magnitude, location of where you're going to be building in Singapore?

[William Huang, executive]

Yes. I think the Singapore location, we choose a site a very good location, which is another cluster -- data center cluster in the western part of Singapore. I think in the future, we will link them to our Johor and Batam data center campus as well. And so we will create a very good platform in the SIJORI area and which our customers very, very like. And this is number one. I think we target -- of course, we target by the end of 2026, we will complete the construction. This is our current schedule.

[Daniel Newman, executive]

The size of that building is quite large relative to the tower quota which we had as of now. And that was a deliberate decision because with a relatively small amount of incremental investment, it give us the option and potential to be able to expand in a number of different ways on that same site.

[Operator]

We'll now take our next question. This is from Louis Tsang from Citi.

[Louis Tsang, analyst]

Congratulations on the strong results, William. I think overall, the domestic [indiscernible] results are very positive and encouraging. So today, I have 2 questions. The first one is that regarding the GDSI. Could you please further elaborate on the rationale of entering the Thailand market? Or let me put it this way, how should we think about like the future demand and the availability of the resources like connectivity, power, land, water? And do you think that if there's any possibility that Thailand could be another DC hub similar to Johor? That's my first question. Maybe I should go one by one.

[William Huang, executive]

Okay. I think the rationale to enter into Thailand is still -- we always think about the -- Thailand is 80 million population and the economy grows very healthy. And if you noted recently in this year, a lot of the hyperscalers announced investment in Thailand. And we also understand that digitalization [ divested ] digital economy is a key driver. It's a national, let's say, national strategy to drive the Thailand economy. So the government is very, very support all the foreign investment to Thailand. So we are very proud that we are the first hyperscale player enter into this market. We always -- we enter into a market more early than anyone else. And we're definitely confident there's a lot of the demand will come in. So I think this is the rationale.

In terms of the -- I think currently, we are more targeted our customer, they mainly service -- serve local domestic market. I think -- but Thailand has the potential to grow up another data center hub in Asia Pacific in terms of the local economy plus their inference for the country around them, right? So I think in Asia Pacific, we believe there's not only one data center hub, right? In the future, I think the more -- maybe there's another 2 or 3 data center hub will grow up. So I think this is our rationale to think about.

[Louis Tsang, analyst]

Okay. And the second one is about the domestic one because I think the domestic move-in target that I just heard was really good. And I just want to know like how should we recalibrate the outlook for the domestic move-in like next year? Because you said that the demand is going to sustain. But just like if there's any chance like that the move-in will see like a further acceleration next year or would you think that like maybe you will maintain like a similar level? Because to me, like based on my understanding, right, the CapEx up cycle of the domestic giants similarly will accelerate in next year, the first half maybe. So I just want to know more about the outlook for that.

[Daniel Newman, executive]

Yes. To clarify because I think Liu Yang asked earlier, the slightly higher than guided CapEx this year is bring forward. It doesn't indicate that, that's the kind of level next year. In fact, I'd say, if we were giving guidance for next year now, it would probably be the same as our original guidance for this year, around RMB 2.5 billion.

For the move-in, we're talking about net additional area utilized. So the gross level is the 25,000 square meters in the third quarter and then net of churn on an annual basis, we expect 60,000 square meters this year. And we're confident enough at this time to say that we expect that level next year as well. This rate of growth when I was talking about our strategy is really the result of continuing to be very selective in terms of new business and focusing on delivery of the backlog and minimizing CapEx to prioritize cost to complete and increase asset utilization. I think utilization rate, we expect to increase by -- to the high-70s from low-70s at the moment to high-70s by the end of next year. That's our base case.

What we can't be certain about is the opportunity to undertake new campus development because undoubtedly, there will be demand from hyperscale coming to Tier 1 markets, which requires new development. And we have a land bank, land with power quota, multiple sites around Beijing, Shanghai, Shenzhen, Guangzhou. And that kind of resource is scarce and it will be in demand. It's our choice to proceed with those kinds of opportunities if they're attractive enough and we choose to do so. But ideally, that would go in sync with having established a mechanism and vehicle for monetizing stabilized assets. I think that's ideal from a point of view of our shareholders. The timing may not be exactly matched, but I think both are -- we expect to see those kind of new development opportunities next year and we talked about the progress we expect to make with our asset monetization, both the pre-REIT and the C-REIT over the next few quarters.

[Operator]

The next question is from the line of Frank Louthan from Raymond James.

[Frank Louthan, analyst]

On the Batam design, can you give us some idea of what makes that so advanced? And when you do a build like that, how much of that CapEx are you paying for on your book that's sort of at risk versus customers that are building in what you charge them to pay for what I assume is additional cooling or other things like that?

[William Huang, executive]

This is a liquid cooling design -- based design. I think -- yes, this is definitely all the new -- this is designed for the -- we call the AI-ready data center, right? I think -- of course, a lot of the designs are mainly customized by the customer. They pay everything, right [indiscernible] yes.

[Frank Louthan, analyst]

Okay. And what sort of power density are you able to get with this design? Is there a limit to it or what -- how should we think about that?

[William Huang, executive]

It's around -- I think it's around the, let's say, average is around [ 20 gigabits per second ] if I maybe -- yes, it's roughly, I think, yes.

[Operator]

The next question is from the line of Edison Lee from Jefferies.

[Yu Lee, analyst]

Congrats again on a very good progress. I think I want to focus on China, because I'm very [indiscernible] but when I looked at the net area utilized, it actually grew by 11%, 12% on a year-on-year basis, but your China revenue only grew by 6% on a year-on-year basis. So can you help us understand the trend of that unit pricing going forward?

[Daniel Newman, executive]

Yes. The reason for the disparity between increase in area utilized and revenue is that there's always a lag, right, because the move-in happened over a period of time. I think from 4Q '23 to -- sorry, 3Q '23 to 3Q '24, there was a 4% decrease in the MSR. If you do that comparison on a like-for-like basis, the decline over the past year has been less than that in most quarters. But third quarter to the third quarter, it was 4%. And it was also during the third quarter of 2023 that power tariffs, both the tariff charged by the generator and by the grid, both went up in the third quarter of 2023. And that resulted in like 1 percentage point reduction in the adjusted EBITDA margin when we compare '24 versus 3Q '23.

So I think those 2 together explain the disparity between the increase in the area utilized and the revenue and EBITDA growth rates. Going forward, I think over the next 4 quarters, you can expect the MSR to decline by something like 2% if you compare the same quarter of each year.

[Yu Lee, analyst]

So does it mean that, assuming that, as I said earlier, the net additional [ area utilized ] next year would be, let's say, 60,000 square meters and then you have price erosion of 2% final [indiscernible] actually grow at high single digit, right, next year?

[Daniel Newman, executive]

That's right. I mean we aim for 10%, but yes.

[Yu Lee, analyst]

Aim for 10%. Okay. And then a quick follow-up. I mean, given slightly higher CapEx this year on China and then you're talking about maybe investing in some high potential new projects, does it change your objective or previous target to be free cash flow breakeven in 2025?

[Daniel Newman, executive]

No, it doesn't, right, the start, that's not reflected in the numbers, right? It's an upside opportunity that we're just flagging, but it would require additional investment. I think we will, in our base case, be comfortably positive in terms of cash flow before financing next year as indeed we will this year. If we incur additional investment and the CapEx is higher than, say, the RMB 2.5 billion number that I mentioned, hopefully, that will be in conjunction with having completed some asset monetization. And the net, it should result in us still being positive.

[Operator]

The next question is from the line of Sara Wang from UBS.

[Xinyi Wang, analyst]

Congratulations on the solid set of results. I have 2 questions. First is on China. So would you please elaborate more on the potential outlook of China business? Meaning I think as management just mentioned, if we want to grab the AI opportunity in Tier 1 markets that involves new investments. And -- but at the same time, we are also having quite a decent backlog. So previously, we were talking about cost to complete existing backlog. Is there any change in the cost to complete assumptions given now the demand is driven by AI, but maybe some of the backlog is entered 1 or 2 years ago in the late cloud cycle?

And then my second question is on International business. Given the solid new orders signed this year, how should we think about the new orders into next year, for example, in terms of volume? And then it's glad to see that we are entering into new markets. But given we are working in multiple overseas markets, which one is our top priority?

[Daniel Newman, executive]

Let me start with the cost to complete. So as of the end of the third quarter of '24, we had 120,000 square meters under construction. And the cost to complete for that capacity is RMB 6 billion. Some small part of it actually relates to some data centers which are already in service because sometimes there is some cost to complete, meaning fitting out some space, which is not yet utilized where we were able to phase the timing of the installation of M&E and so on. But across the in-service and under construction portfolio, the cost to complete in aggregate is RMB 6 billion.

If we were to undertake a completely new project, we would be utilizing land and energy quota, which we already have. That's why we put into our earnings presentation again a disclosure about how much capacity we have held for future development because this is becoming relevant again. And this is scarce resource. There are not that many options for customers as they're looking for somewhere to be able to deploy 50 megawatts or more in the edge of town around Beijing, Shanghai, Shenzhen, Guangzhou, and we have a number of solutions for that.

But you can -- you know our unit development cost in China at 50 megawatts, we're probably talking about incremental RMB 1 billion to RMB 1.5 billion, but one project like that could add 4 or 5 percentage points to our growth rate. So that's how we think about it. But we're just talking about it now because it's a possibility for us next year, but it's our choice whether we go ahead with that. It really depends a lot on the -- how attractive the commercial terms are.

[William Huang, executive]

Yes. I think we still -- in terms of the International market, I think we definitely, SIJORI is still our main focus, SIJORI area, and we're well positioned on that and we have very good location and customer base already. And we see a lot of demand in our pipeline. And I think to monetize our position, our -- secure the power and the land is our -- definitely is our first priority.

But in terms of the new market -- in terms of new sales, I think the next year, we aim to, let's say, 200 megawatts. And as last quarter, I said in 3 years, we will double our -- we try to reach to the 1 gigawatt sales in next 3 years. So I think this is our target. And I think we are very confident on this target, which set up already.

And in terms of new market, I think definitely a new market, so another strategy because this demand wave is global demand. So if you look at the AI-driven demand, it's not only in Southeast Asia, even in Japan and Middle East, Europe and the U.S. as well. So we try to -- we try to maintain our, let's say, long-term growth. So we should look at the new market opportunity very closely. So Thailand market is one of our new market, but I think that is still in the Southeast Asia. But I think we also target some new market like Japan, like we already started a new project already, but it's a [ test water ] project.

We have our team very closely to follow up the market trend in Japan. And even we have some study, very deep study in the European market. So we try to set up another couple of the growth engine in the next few years.

[Operator]

As there are no further questions, I'd like to now turn the call back over to the company for closing remarks.

[Laura Chen, executive]

Thank you all for attending today, and we'll see you next time. Bye.

[William Huang, executive]

Thank you.

[Operator]

This concludes the conference call. You may now disconnect your line. Thank you.