GDS Holdings

 What It Is:

GDS is China’s largest carrier-neutral data center provider, operating 88 facilities—mostly in the prized Tier-1 cities like Beijing, Shanghai, Guangzhou, and Shenzhen. With over 90% of its capacity in these high-demand areas, GDS is perfectly placed to ride the wave of China’s accelerating digital transformation.

Why It Has Value:

• Built-In Moat:
  GDS’s strategic focus on Tier-1 cities means it controls access to scarce resources—land and power quotas—that are increasingly hard to come by. This isn’t just a geographic advantage; it’s a real, tangible moat that competitors simply can’t match.
• Attractive Valuation:
  Despite some short-term headwinds—think higher power tariffs and regulatory noise—the stock is trading at a significant discount relative to its global peers. In fact, while many companies are priced at a premium, GDS is down by roughly 50% versus global competitors, offering a margin of safety that’s hard to ignore.
• Solid Management & Growth Potential:
  Management has a proven track record of smart capital allocation and execution. They’ve secured prime assets well ahead of demand, setting the stage for explosive revenue growth as China’s digital and cloud sectors mature. We don’t need to be rocket scientists to see that once the market recognizes this, the upside could be substantial.

Why We Are Long:

We’re long GDS because, despite temporary setbacks and a nervous market, the fundamentals remain rock solid. The stock’s current valuation reflects short-term concerns rather than its long-term growth story. With a clear moat, a robust asset base in high-demand locations, and management that knows how to execute, we believe GDS is trading too low. In cyclical industries like this, pain often creates the best buying opportunities—and we’re convinced that once China’s digital appetite catches fire again, GDS will be well-positioned to deliver impressive returns.

Author has a long position in GDS