Hello, ladies and gentlemen. Thank you for standing by for GDS Holdings Limited's First Quarter 2020 Earnings Conference Call. At this time, 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.
Thank you. Hello, everyone. Welcome to 1Q 20 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'll refer to during this conference call can be viewed and downloaded from our IR website at investorsgdservices.com.
Leading today's call is Mr. William Huang, Judy's Founder, Chairman and CEO, who will provide an overview of our business strategy and performance. Mr. Dan Newman, GDS's CFO, will then review the financial and operating results. Ms.
Jamie Kuo, Our COO is also available to answer questions. 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 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 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 the call over to GDS's Founder, Chairman and CEO, Mr. William Huang. Please go ahead, William.
Thank you, Lona. Hello, everyone. This is William. I'm here in Hong Kong with Dan and Jamie. Who is celebrating his first day of release from government's quarantine.
Thank you for joining us on today's call. I'm pleased to report that our performance despite the challenging operating environment, we grew adjusted EBITDA by almost by almost 50% year over year and achieve our highest ever margin at just over 46%. Sales momentum was strong coming into the pandemic and is even stronger now. In 1Q 20, we achieved a record level of organic sales with over 22,000 square meters or 46 megawatts of net adder. In order to keep pace, with sales, we scaled up our development program.
We ended the quarter with over 10,000 square meters of 260 Megawatts of capacity under construction, which was nearly 70% pre committed. We also added added over 100,000 square meters of develop capacity to our pipeline. Last but not least, we maintained our record of double 0 with 0 infections and 0 service incidents. We have been we have we have been through a lot of turbulence since our IPO. Trade was pandemic, short attacks, even all three at the same time, at the same time.
But our business has not been impacted. We have kept our focus and demonstrated our execution capability. The outlook for our industry is better than ever. Cloud is our main growth driver. Cloud Everates demand from all types of customers and all types of new technology.
You may have seen reports that Alibaba plans to spend another RMB200 1,000,000,000 or nearly US30 billion dollars on infrastructure in the next few years. Other cloud service providers are also reporting accelerated a severance adoption. Cloud in China is forecasted to grow at over 30 percent CAGR for the next 5 years. We estimated that this would require at least three times expansion of cloud datacenter capacity. The expansion will be balanced between Tier 1 market and the low tier markets.
This is this is the opportunity, which we are talking to our customers about. Their procurement is consistent. They have high visibility in their business and they are planning multiple years ahead. As cloud service providers growth. They set up a new availability rooms each of which is centered around an on ramp.
We focus on hosting this on ramp when they roll out and then, hosting the expansion capacity in the same location. But on ramps also enable us to drive enterprise business. Increasingly, enterprises recognize that multi cloud ecosystem ecosystem as a key advantage. We have had a lot of success with this strategy As a result, we are well To illustrate this point, our number one customer is now present in half of our data center centers. And our number 2 customer is now presented in 1 third.
This is what we mean when we say that we are the home of the cloud in China. In 1Q 20, we obtained 3 orders of over 10 megawatt each. The first time this has happened, We have many more prospects like this in our sales pipeline. At the beginning of the year, we set ourselves. Sales, we set ourselves a sales target of 80,000 square meters, organic net adds, a step up from what we did last year.
2Q 2020 is going well. By the middle of this year, I'm confident that we will be more than halfway Our data center development plan is entirely demand driven. We can see the evidence in our consistently high pre commitment rates. It starts with joint resource planning with our customers. They share with us their specific requirements.
We then go out to right kind of land, buildings and power. Our objective is to keep our customers fulfilled on a continuous basis, both in Tier One markets and the lower Tier markets. In order to do this, we have evolved our resource strategy in a number of different ways. This is illustrated on Slide 7. First, we have increased our ownership of property.
As this gives us more options, more flexibility and more certainty. Across our whole portfolio, we are on track for a ratio of 60% owned versus 40% leases. Secondly, we have significantly increased the amount of capacity which are holding for future development. This is very strategic because it gives us the flexibility to respond to a higher level of demand. Our securities and pipeline is enough to double our total capacity.
And certainly, we have expanded our market presence in particular with our innovative asset light approach to build to suit projects in Lower Tier markets. This expands our addressable market, enhances our returns and deepens our strategic customer relationships It is still early to, but we see high volume growth potential with this product. Turning to Slide 9. In 1Q 20, we closed the acquisition of a site in the Pujiang District of Shanghai. It is a good example of how we are solving the problem of resource supply.
The sites can support over 70,000 square meters. Net fraud Next floor area, we are fully divested. Such a larger amount of capacity on a single site within a Tier 1 market is unique It is very advantages for hyperscale customers as it enable them to land and expand in the same location. In the current quarter, we have begun the conversion of 2 existing buildings which accounts for around 30% of the development. There is a lot of customer demand for this project.
A couple of years ago, we started working with a strategic customer for beauty suite data center. At one of their remote campuses. As of today, we have completed the 6 B2C sale projects for them. 4 of these proxies are consolidated. There's a there's a photo on Slide 10 The remaining 2 are held pending sales to our joint venture partner.
GIC in the very near future. There's a photo on Slide 11. We have been pitching to other customers and just recently We were selected by a second major customer for their remote projects. We hope to partner with GIC again using the F And Life model Our customers needed to expand in low tier markets in sync with their expansion in Tier 1 markets. We are uniquely well positioned to address both opportunities.
With that, I will hand over to Deb for the financial and operating review. Thank you, William. Starting on Slide 14, where we strip out the contribution from equipment sales
and the effect of FX changes. In 1Q 20, our service revenue grew by 6.3%. Underlying adjusted NOI grew by 8.5%. And underlying adjusted EBITDA grew by 10.5 percent quarter over quarter. Our underlying adjusted EBITDA margin was 47.4 percent, the highest level we've seen.
In 1Q 20, we incurred a small FX translation loss. We target 0 FX exposure. However, As we move cash into and out of China, it is unavoidable that we will recognize some FX gains and losses. Turning to Slide 15. Service revenue growth is driven mainly by delivery of the committed backlog.
Moving during 1Q 20 was 7800 Square Meters, in line with our expectations under the difficult circumstances. Our MSR per square meter was down by 2.4% quarter over quarter. Most of this decline is mathematical because move in was backend loaded. In addition, there was a temporary reduction in some power tariffs that reduced revenue. If you look at MSR per square meter, net of utility cost, The decrease was less than 1% quarter over quarter.
We recognize revenue as capacity is utilized in accordance with the terms of customer agreements. And then we build customers and collect cash with about a 70 day time lag on average. Slide 16 shows that our cash collection over the past 3 years is almost exactly equal to the revenue recognized. So far, we've not experienced any payment or deferral problems in the current situation. We have a very high quality customer base, Apart from the cloud and large internet names, which you know, the rest of our customer base is predominantly financial institutions, and multinational corporations.
Slide 1718 showed the quarterly margin trends. A few things stand out. As a result of the reduction in some power tariffs, which I just mentioned, utility costs was more than 1 percentage point lower than normal. SG And A was also down due to a combination of working at home, operating leverage and other government concessions. Some of this cost saving continued into April May.
Accordingly, we expect the underlying adjusted EBITDA margin to be in the In 1Q 20, CapEx was elevated, mainly due to the payment for the Pujang site, which William highlighted. Our organic CapEx was just over $1,000,000,000. As at the quarter end, the cost to complete the entire 110,000 square meters of area under construction was RMB 7,400,000,000. Activity on our construction sites is now back to normal. There are no supply chain issues to report.
We've made minor revisions to the data center delivery schedule, which is shown on Slide 20. On Slide 22, we show our cumulative unit development cost for self developed area and service. We defined development costs as gross PP and E, including assets held under finance leases. As you can see, our unit cost is now just over RMB78000 or $11,000 per square meter. This is for a data center portfolio, which is almost entirely 2N redundancy.
Over the past 3 years, we've increased the overall average power density to over 2 kilowatts per square meter. The unit cost per megawatt is therefore around US5.6 million dollars, which we believe is exceptionally low by any benchmark. We've achieved this as a result of the scale of our construction activities The efforts of our in house team to standardize design and improve management of the supply chain and by working in close partnership with our major customers. For 2019, we achieved a return of 15% on area in service with an average utilization rate of 69%. If we segregate out with stabilized data centers, as shown on Slide 21, The return was in the high teens with an average utilization rate of over 90%.
There are many moving parts to these calculations, but it all comes Turning to Slide 23, we had 2 pending acquisitions. For Beijing 9, all the installed customers have entered into new contracts with us, and we are managing the data center until the final CPs are satisfied. For Beijing 101112, we expect to close by the end of the current quarter. When we announced the deal last December, 2 data centers were in service and 1 was under construction. The overall utilization rate was 50%.
As of today, all three data centers are in service and the utilization rate has increased to over 70%. Our M and A pipeline is strong. We are pursuing projects at the development stage and projects which are already ramping up. Data centers in China are attracting a lot of interest, particularly from financial buyers. This opens up new possibilities including working with partners.
We will be able to conclude some more highly accretive deals. Looking at our financing position on Slide 24. We ended 1Q 'twenty with cash of RMB3.6 billion. We're now in the process of refinancing several of our recent property acquisitions in Shanghai and Hong Kong. Pro form a for this refinancing, our cash balance is backup over RMB5 billion.
I mentioned earlier that the cost to complete our current area under construction is RMB7.4 billion. Assuming 40% of this is financed with equity, we will allocate $3,000,000,000 of our cash to capitalize these projects. On the debt side, we have onshore renminbi denominated project financing place or in process for most of the remaining requirements. We pioneered data center project financing in China and banks like the business. We have an excellent track record as a borrower and the banking market is highly supportive.
Nonetheless, In order to give ourselves more flexibility over the timing of project finance, we are putting in place a large revolving credit facility at Holdco level. Our policy is to maintain a fully funded business plan. However, as is evident from our results, Our growth is going to higher levels and the opportunity in front of us is expanding. From a strategic perspective, is important for us to be in a position to respond to demand and keep our customers fulfilled. Therefore, we are always looking at ways of strengthening our capital base.
We are well positioned in terms of access to capital both from public and private sources, and we'll continue to evaluate all of our options. Finishing on Slide 25, Our contract backlog now stands at 123,000 square meters, equivalent to 75% of our revenue generating area. 75,000 square meters relates data centers, which are still under construction. Delivery of these contracts will commence over the next six quarters as and when the data centers come into service. 47,000 square meters relates to data centers, which are already in service.
In 2Q 20, we're expecting additional area utilized of over 10,000 square meters. Based on the 1st 6 weeks of 2Q, we are well on track to meet this target. It is the gradual recovery, which all being well we expect to accelerate later in the year. Today, we are confirming the full year guidance for revenue, adjusted EBITDA, and CapEx, which we gave on our last earnings call 7 weeks ago. With that, I will end the formal part of our presentation and we'd now like to open the call to questions.
Operator?
Ladies and gentlemen, we will now begin for the benefit of all participants on today's call Your first question comes from the line of Jonathan Atkin from RBC Capital Markets. Please ask your question.
Thank you. So I had a question about customer demand and then a question about kind of resource procurement and development. And with respect to customer demand, I just wondered if you can comment With respect to the overall market in China, any different trends that you're seeing respect to Tier 1, demand versus more remote locations. Question about, development is just whether you have seen any changes with respect to challenges around resource procurements the permitting environment for municipal projects or edge of town projects. Thank you.
Yes, John, I'll go first. Your first question about demand in Tier 1 markets and demand in lower tier markets. 1st of all, I think as we made clear, the overall demand picture has strengthened, and this is a result of a number of factors. Demand is present in both tier 1 markets and in lower tier markets. And it grows in sync.
The ratio for different customers differs. But on an overall average for the hyperscale and large internet customers is roughly fifty-fifty. So historically, our business has been focused on Tier 1 markets. And last year, through our partnership with GIC, we found a way of opening up the opportunity to work with our customers in lower tier markets. And I think that has proven to be very strategic in terms of enhancing our customer relationships as well as potentially being a very material opportunity in its own right.
Yes.
I think, John, based on our bottlenecks, composition with our major customer, I think the number they show us in the next 3 5 years, it's a very, very big number. Data ever we ever seen. And it's reasonable, we think, because the cloud their business plan, their visibility is very high. So I think the over the time, I think the China data center market is very exciting in a 3 or 5 years view. It's very exciting.
Question is about the challenge of the resource. From the resource point of view,
I think the GDS already took the action industry it's 2 or 3 years ago because we start to seeking some larger land and capacity and the power capacity, big because we believe this is a will fit for our customer future demand. So we are the first mover to focus on the edge top, the edge top. To get back our resource. So in an we can say, we had a first mover And we got a lot of deal, we secured a lot with land bank and a power. And, it's not for us.
It's not an issue for us. For to fulfill our customers, to fulfill their next 3 or 5 years business plan. But in the let's say that in the urban town, still challenging for everybody, right? In terms of the power cordless policy is still not very clear right now. Although a lot of the people talk about it, the new infrastructure policy will if the new policy will release the more power.
So far, we didn't see that. But we're willing to see that, right? If that's the case, it's worth of GDS can do more, but we wait, we are waiting. But on the other hand, we are quite certain. We already locked up a lot of the edge time resource, which our customer like.
Great. And then maybe just squeeze in the final question. On slide 39, you give the contract renewal schedule And if you could maybe just remind us, at what point do you start having those discussions around renewing contracts that expire during 2020, 2021 and so forth? How far in advance, are you having that dialogue?
Yes, John, the, just looking at the slide. Yeah. It's slide 38, my copy about contract renewal. It shows 18,000 square meters of capacity or 6.3 percent of our total area committed comes up for renewal this year. We drill down into the composition of that.
There's no concentration. I mean, the largest contracts that come up for renewal single digit percentages of that 18,000. There are a few which pertain to cloud and internet customers, those are actually for our 1st generation data centers, meaning Beijing wan, Shenzhen wan, Kunshan wan, and so on. So, you know, those were the first deals, which we did back in 2015, 2006 seen, or maybe 2017, as I may have mentioned on a previous earnings call at the time, these were unprecedentedly large calls, large deals. And now you look at it, it's a 1000 square meters.
It's, not even worth calling out in terms of, our, our, quarterly growth. We believe that those customers will stay put. These are equivalent of edge data centers. They put on ramps in some of these data centers. I don't think they're going anywhere.
The price negotiations, I think we can say at least will be flat. And I've also mentioned before, we have to look at this in the totality of our overall relationship with these customers. What we're doing with them elsewhere what returns we're getting with them across the entire relationship. I don't think we could just isolate out one particular data center and and treat it as if it's a completely standalone commercial negotiation.
Thank
you very much.
Your next question comes from the line of Yang Liu from Morgan Stanley. Please ask your question.
Could management share your thoughts on the public REIT policy issued by Chinese Financial Regulator? What is GDS plan on that, especially given the property ownership is increasing faster? My second question is, could you please update us on the customer moving pay in second quarter. You mentioned that there's no server supply issue anymore. Have you observed the meaningful recovery of moving pace so far?
And then what is the current average month from a customer from better delivery to mature? Thank you.
Yang was referring to a pilot project announced by a National Development And Reform Commission and the Chinese is regulatory commission to promote the creation of a market for publicly traded REITs in China backed by, profitable infrastructure. From our point of view, yes, it's interesting. We have growing portfolio of stabilized data centers, an increasing proportion of them are owned fully wholly owned properties. And we should always consider whether it's beneficial for us to recycle capital out of such properties, whilst maintaining management and operation control for the long term. The creation of a publicly traded REIT market might give us one option to do that, but, there are many details still to be filled in in terms of how this pilot scheme is going to work.
Meanwhile, we are already doing it in a way. We have many REITs throughout partnership with GIC. And the largest financial institutions in China have approached us about, the same kind of structure. And we can probably achieve the same result to privately negotiated deals. 10 years ago, when we got into the data center business, we took the decision to structure, each project where possible with a separate asset code for each data center and then held a separate entity have the customer contracts and the operations.
So we always had in mind that this would give us the flexibility to package assets or sets of assets in future if it gave us better financing options. So we've always had this in mind. As I say, I think the REIT scheme as it comes into fruition may just give us one more option. The second question about the customer move in pace. So it was just under 8000 square meters in the first quarter.
And Right now, we're halfway through the 2nd quarter. And I think we're looking at about 10,000 to 11,000 square meters in the 2nd quarter. It's already halfway, to that level. So it's going smoothly. In the third quarter 4th quarter, even in our original plan, we are expecting a step up.
And to some degree, it ties back to the completion of data centers, new data centers coming into service. And we put a a page in the presentation showing you how much capacity comes into service in each quarter in the remainder of this year and in the first half of next year. And if you look at the backlog, you see that at the end of the first quarter, we had about 47,000 square meters of backlog commitments. Which relate to data centers already in service. Typically, we see that backlog be delivered at a rate of about 20% to 25% per quarter.
So yeah, if we hit 10,000 to 11,000 square meters, In the second quarter, it will represent 20% to 25% of the backlog at the end of the first quarter. And over many quarters, if you adjust for M And A and look purely at the organic business, you'll see that kind of ratio holds consistently true. So I think if you use that methodology, it would lead you to forecast high level of movement in the 3rd fourth quarter.
Your next question comes from Sene Saylor from Cowen. Please ask your question.
Great, thank you. Nice job on the name. I guess on your prepared remarks, you mentioned that a second major partner, you guys have recently partnered with the 2nd major partner, excuse me, for remote sites. I'm curious, was any of that reflected in the bookings or leasing the 22,000 square meters that you guys reported. And I'm just curious if that spike stands since there's obviously been a lot of focus on them explicitly in terms of what they may be doing.
And then secondly, you mentioned that due to COVID-nineteen that the government had changed some things around power, which impacted both revenue and costs. I was wondering if you could be more explicit and actually talk about what the impact was both to revenue and then the offsetting impact, which ultimately gets us to the NOI? Thank you.
Sure. Copy that. I'll go first. Talk about the remote site business. We have one major customer that we've been working with initially on a consolidated basis.
And then in the second iteration, through our partnership with GIC. And now we have activity at 3 different sites. We've completed 4 projects in one site, which are the consolidating projects And we had a commitment to do 7 projects, through the joint venture. That's now increased to 12 projects. And with that customer, we're talking about a very significant increase in the volume of projects over the next couple of years.
And then separate from that, a second major customer has now give us a purchase order for their remote projects The first one is going to be a trial. We have to go through the commercial negotiation and the design case. But potentially the volume from that second customer, could be as high as, from from the first customer. It's not by chance. ByDance is one of the few very large data center users in China, which is not yet our customer.
We are aware of demand that they have in tier 1 markets and we're trying very hard to fulfill that and to establish our relationship with them. That's a high priority. I mean, do you want to add anything to that before I talk about talent?
Yeah, I think, yeah, we are we're pretty focused on the hour we call the 3 major crop here. So there, as Sam mentioned, that their next 3 or 5 years it's a very big number in terms of the, both in the balance in the tier 1 market and then remote. We try to get it there, both market share as much as possible. So I think it's not including the bidance. And because bidance currently there is still in a deploy their server in a remote area, it's like we hope we can do the deal, like a remote area, like a JV with a GIC But so far, we do, working on a couple of projects, which they're in the kiln market.
So, this is the, this is our number, current number, our focus is not including any guidance expectation.
So probably I'm trying, not to mix up the numbers for the joint venture projects. So in our 20 F and in our earnings presentation and so on, keeping them quite separate. When you hear us talk about headline numbers, right? 22,000 square meters net adds. That's all our core business.
It completely excludes the joint ventures. The joint ventures is disclosed on page 11. Those numbers are not, included, aggregated without our core KPI Zent anywhere. Yes, our comment about power, because of the pandemic situation, the government in China has had a number of schemes to provide some support to economic activity. We've benefited in 3 principal ways.
1st of all, there was reduction in some power tariffs in some places, most of which we passed on to customers, but it did result in a slightly lower revenue in MSR, but also result in a slower cost of revenue. And then secondly and thirdly, there was a reduction in rent, payable to our landlords, which are state owned enterprises, and also the reduction in contributions that we normally make to what they call the social fund. Overall, if you look at our margin improvements, and I think you have to look at, the metric that we call underlying adjusted EBITDA because that strips out the effect of FX changes. Year, our margin went from 45.6 percent in the fourth quarter of 2019. To 47.4 percent in the first quarter of 2020.
So that's almost a 2 percentage point increase I'd say half of it was due to the government concessions. The other half was due to some cost reduction from working at home, some operating leverage, but frankly, there was also some cost increases as we change the operating, procedures in our data centers. So yeah, I think can say that half the margin improvement was due to concessions and half was due to more factors under our control. So those concessions were continued in April and they're continuing in May. We expect margins in the 2nd quarter to come out at a pretty similar level to 1st quarter.
And then just one quick follow-up on that. So you said April, May, is the thought then if that goes away in June or is that may continue, you just don't know?
Actually, government policy is to continue, but, it can't be certain. If you recall, how Our guidance for 2020, the midpoint of revenue and the midpoint of adjusted EBITDA implied about 46.3 percent adjusted EBITDA margin for the full year. So I think that, that still holds. So it's hard to normalize, right, because we'd have to normalize the government, these concessions from the government, we'd have to normalize the cost savings, but also for cost for additional costs and also for the fact that we lost some revenue, right? So hard to normalize, but I think 46%, the same class is most definitely still, achievable for this year, for this full year.
And wait for Your next question comes Hari Haran from JP Morgan. Please ask your question.
Thanks for taking my questions and congratulations on the continued good execution. First of all, on just a follow-up on the lower tier BTS project, the total project size seems to be ramping up quite quickly. I think you talk about 48,000 square meter already. Potentially more coming with the second customer. Could we have a little bit of understanding about how the economics will work for GDS when you start collecting the management fee, what would be typically the IRR from that?
Is that something, given the area is also increasing quite a bit, even though you only own roughly 10% of the equity, how should we think about earnings contribution or EBITDA contribution from this kind of business given It feels like this is expanding quite rapidly. In the last, I think, roughly a year, you've already had it close to 50 k square meter. That's my first question. And second question, Dan, just to check, could you talk a little bit about how should we think about the MSR trend through the rest of the year? Are we going to basically hold stable once some of these power subsidies etcetera kind of move away?
And could you also maybe shed some light on path to profitability as well as your stable data center percentage continues to rise pretty quickly.
Okay. First, on the lower tier data centers, I want to make something clear, which is this is a completely different product from what we develop in tier 1 markets. It's not just a different locations, a different, product. Typically, it's a much lower redundancy. And may deploy some technologies like high voltage direct current and so on because it's much more cost orientated.
And less, high availability orientated. So all of the metrics, which I hope you've become familiar with throughout data centers in Tier One markets. They don't apply. We need a completely separate set of metrics understand the unit cost and the revenue per square meter and the margin and so on. But as an off balance sheet, I don't think it's worth going there, we shouldn't over complicate.
We do have, a 10% equity involvement. It's literally only $1,000,000 or $3,000,000 per data center. So relatively speaking immaterial, our approach was to maximize management fees. It's a little sensitive. I'd like to tell you what we're going to make.
But you can imagine it's commercially sensitive. It approximates to, let's say, mid single digits percentage of revenue of the data center as clear management fee profit. Once the data center comes into service, just like in Tier 1 markets, the customer has a move in period, which is factored into the return calculations and the pricing. So the revenue ramps up you can see from the projects we did in in Zhengbei in ZB1234 that actually the projects ramped up quite quickly. As they ramp up, we will be earning that, that management fee and that kind of, revenue share profit.
And that will come into our income statement as part of our service revenue, where when it starts to appear, I will call it out. But for now, it's not there. And, yeah, as I said, I don't want to, over complicate I don't think we should talk in terms of an IRR. It would be off the scale even compared with what I showed in terms of the, NOI yields. Simply because we have such a small, equity investment, that it doesn't really make not that meaningful to talk about return on equity when essentially it's a management as a managed project.
For MSR, I think the MSI in the 2nd quarter will be quite similar to what it was in the 1st quarter. And I don't expect, any much more decline over the remainder of the year. There will be some distortion depending on when acquisitions close. There can also be a matter of timing, but also some of these acquisitions actually have lower MSR, but on organic basis, it's been the MSR to be quite similar to where it was in the first quarter. In the past profitability, I always pretend that we have within our portfolio, a platform, but they are highly profitable, highly cash generative, not highly leveraged and so on.
If you look on a consolidated basis, in our 20 F, we disclose the net, profit or loss that so happened, onshore in China and the net profit or loss offshore in China, what you'll see is that the position in China is almost breakeven. So it's the finance costs, which are booked at Holdco level from Holdco level financing, and the stock based compensation, which is also booked at Holdco level, which is, which is lost, but for the business in China, the data center business, it's already almost breakeven. So I think we go forward 1 year, even on a consolidated basis, it will be close to breakeven.
Your next question comes from Tina Howe from Goldman Sachs. Please ask your question.
Two questions for me. The first one is, in terms of, your electricity price for the data centers currently in service, what would the average price fee? And also in terms of the government offered concession price due to COVID-nineteen, what kind of discount did you get? And the second question is that I noticed that you have an acquisition in terms of land in Chongqing. So wondering if we have any pre committed customers for the site, what is the rationale of acquiring the land in there?
Also, I noticed that for the previously Chengdu site, the utilization rate is relatively lower versus the company's average. So how do we prevent this from happening again in the Chongqing side?
The first question about utility cost, there are literally hundreds of power tariffs. So what we're talking about is an effective tariff rate. Your tariffs are structured with a fixed component, which is like a commitment charge because there's a very large amount of generating capacity, which is being reserved for the use of the data center. And we have to pay that commitment charge whether or not we're using it. That's why when a data center comes into service, is part of a fixed cost for the data center and may lead to the data center being loss making until maybe it reaches 15%, 20% or higher.
Utilization. The government concessions were actually mainly to reduce those fixed power commitment charges. So that's where we've got the benefit. As I said, when I my prepared remarks, it was just in certain places. Our effective power tariff, the input tariff, frankly also the output tariff because we pass it through, is about, RMB0.65 to nbp0.7 per kilowatt hour we get the lowest rate, which is applicable to large scale industrial users.
So your second question was about, Pujang? Oh, third question was Chunkin. Oh, you want to ask you. You asked the 3rd question.
I think Chongqing is, mainly driven by one of our major customers. So this is, we bought a land and we prepared to get an order in the second half year, I think it's a high achievable.
Yes, Tina, your second question was about the site we acquired in Pujang District of Shanghai. As we've been saying for many quarters, I think, that is a very familiar now, and it's very challenging to obtain the right kind of real estate and power capacity in the urban areas. Nonetheless, it's absolutely clear and have been no doubt our customers still require it. The edge of town capacity is a good substitute enabling them to scale up, but they still require the downtown data centers, which are connected to the edge of town site. So we have to work very hard to generate, new projects in the urban areas and we've had to try a number of different approaches including buying buildings, doing acquisitions and so on.
In the case of the Pujang site, This is unusually large industrial complex in a very good location because it's close to where the submarine cable landing stations are in, in Shanghai. And we were able to
have
an agreement with the landlord that we would proceed with the acquisition of the property, if and when or as and when, we obtained the power capacity approval from the government. And then last year, we did obtain that power capacity approval the Shanghai Municipal Government, and it pertains to this site, to this project. So that's why we went ahead. As William commented, hyperscale customers value a great deal the ability to expand on the same site to put in an on ramp and then to have visible expansion capacity on the same site. So having a site that's as large as this really has very unique, you know, marketing, marketing angles and, we would regard it as a kind of crown jewel project.
Yes. Let me collect, I think, In terms of the Chengdu, I think the, yes, in the whole portfolio, looks like a moving a little bit lower than our other major data center. But what we can see is that the tenders data center and a movie will catch up in the second half of the year.
And maybe just a quick follow-up in terms of your CapEx guidance of ZAR7.5 billion this year. I'm just wondering how much of that is is like land purchase? And then the other the rest, I guess, will be like the data center site construction?
Yes, the CapEx guidance was rmb 7,500,000,000. In round numbers, $2,500,000,000 relates to acquisitions of data centers as well as of the property and land, principally it consists of the payment for the Pujang site and the payment for the Beijing 9 acquisition when it closes and the payment for the Page 10, 11, 12 acquisition when it closes. So that accounts for most of that $2,500,000,000 number. The organic CapEx is around RMB5 billion. So it's running at about 1 to $1,500,000,000 per quarter.
Your next question comes from the line of Frank Louthan from Raymond James. Please ask your question.
Great, thank you. I wanted to to touch on some new logos. What are you seeing from in particular, what are you seeing from your customer base of non domestic Chinese companies, how is the sell through going to them? And currently during the crisis, And then secondly, what are you seeing from new logos in the quarter and quarter to date? How is that tracking?
Yes. Actually, in the first quarter, we win we won a very, very good new logo. 1 is the largest coffee prayer in the world, right? Not lucky. So another is, another very, very remarkable, I mean, logo is one of their, very critical we call it a foreign currency carriers in house, which is one of the branch of the central bank.
That's that means Central Bank keep giving GDS a new order. In terms of the accepted China unit pay, other clearing house and So we win a lot of the new low, meaningful new logo from them and in a big way So I think they also contributed our new order booking in a significant way in the first quarter. We think this trend will maintain because as I mentioned, now that a lot of retail customers quite recognize the value of our data center, multi cloud access data center platform and the high quality of the operation. So we will attract more high quality retail customer more and more in the next couple of quarters, which I believe.
Due to the limited time of the call, I'd like to now to turn the call back over to the company for closing remarks.
Thank you, everyone. Once again for joining us today. If you have further questions, please feel free to contact GDS Investor Relations through the contact information on our website and the Piacente Group Investor Relations. Bye bye.
This concludes this conference call. You may now disconnect your lines. Thank you.