Lockdowns and Economy Affect GDS Holdings in the Short Term, but We Remain Positive; FVE Down to HKD 43

No-moat GDS Holdings has been hit by the macro conditions in China and has mildly downgraded its 2022 guidance. However, the company has announced a new funding source and continues to expand its data center footprint both in China and the Asian region. GDS Holdings reported a decent second-quarter 2022 result in the circumstances with revenue up 24% year on year and adjusted EBITDA up 18.6% year on year. The adjusted EBITDA margin contraction to 46.0% from 48.1% a year ago is in line with management's 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.