Hello, ladies and gentlemen. Thank you for standing by for GDS Holdings Limited's fourth quarter and full year 2021 earnings conference call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference call is being recorded. I'll 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 the fourth quarter and full year 2021 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. Ms Jamie Khoo, 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 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 can 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'll now turn the call over to GDS Founder, Chairman, and CEO, William Huang. Please go ahead, William Huang.
Hello, everyone. This is William. Thank you for joining us on today's call. I'm delighted to report another year of strong financial results. In 2022, we grew revenue by 36% and adjusted EBITDA by 38% year-over-year, in line with our guidance. At the same time, we made significant progress in key business areas which underpin our long-term success. We sustained our sales momentum, adding around 120,000 sq m or 280 MW of new commitments from an increasingly diversified customer base. We secured over 300,000 sq m of new capacity supply in Tier 1 markets in China by a combination of land purchases and project acquisitions. These increasingly scarce resources will give us a competitive advantage for years to come.
We've put in place the foundations for our Singapore Plus strategy with two complementary campuses in Malaysia and Indonesia. We increased our use of renewable to over 30%, and we completed over $2.6 billion of debt financing to ensure that our projects are fully financed on a sound basis. In addition, we raised over RMB 600 million from a private CB issue with strategic value add. Our strategic market position is stronger than ever. Despite the challenging operating environment, we remain focused on executing our business plan, improving our efficiency, and seizing key opportunities when they arise. In 1Q 2021, we booked 23,000 sq m of new commitments. For the full year of 2021, we hit our sales target with 96,000 sq m of organic bookings and 23,000 sq m from acquisitions.
For 2022, we expect to achieve around 90,000 sq m of new organic commitments. While there is some change in the demand profile, overall demand is at a similar level to last year. As shown on slide six, we won five hyperscale orders during 4Q 2021. Hyperscale typically means cloud and a large internet. But in each of the past two quarters, one of our hyperscale orders was from a financial institution. Turning to slide seven. During 2021 as a whole, we saw a change in our new business mix, with cloud accounting for 50%, large internet for 30%, and FSI and enterprise for 20%. Our sustained sales momentum demonstrates the strength of our customer franchise across the demand spectrum. Turning to slides eight and nine.
One of the key to our success is having the right capacity in the right place at the right time. This enable us to provide a more complete solution to our customers and the differentiations GDS from the competitors. In Tier 1 markets, it has become increasingly difficult, if not possible, to obtain sustained suitable land for data center development, together with the necessary power quota and access to non-renewable. Customers must be able to scale up their presence in Tier 1 markets in order to satisfy the requirements for low latency and high availability. This is recognized in the government's East Data, West Computation concept for the data center industry. During 2021, we accelerate our capacity sourcing in order to build up a sustainable supply.
We acquired or entered into definitive agreements for 16 data center projects, mostly located in the urban areas of Beijing and Shenzhen, where new supply is limited. We acquired and purchased the land with energy quota in all the Tier 1 markets. In total, we added around 300,000 square meters to our development pipeline, equivalent to over three years new bookings at our current sales run rate. It is valuable asset which underpins our ability to serve customers and create value for our shareholders going forward. While assuring our position in mainland China, we also took significant steps to build up our presence in Hong Kong and Southeast Asia. In Hong Kong, we now have a pipeline of four purpose-built data centers that will enter service between 2022 and 2025.
Ensuring continuous supply, we have an anchor commitment for Hong Kong 1, and expect to have commitment for Hong Kong 2 in the second half of this year. I have been in Singapore for the past few weeks. I'm very excited by the potential of our regional strategy. We will initiate construction of our Southeast Asia projects in the next few months, and to obtain our first anchor orders shortly thereafter. Turning to slide 14. A few months ago, we published our first ESG report and set out a target to achieve carbon neutrality by 2030. In 2021, we achieved a 34% renewable energy usage compared with the 22% in the prior year of 2020.
Recently, four of our data centers were recognized by the government as national green data centers based on their renewable energy usage and advanced green technologies in design and operation. To conclude my part, all the things that we have done are for long-term business plan. All the temporary uncertainties in the macro environments are not going to impact our execution of business. We are positioning ourselves to be long-term winner in the data center market. Now, I will hand over to Dan for the financial and operating review.
Thank you, William. Starting on slide 17, where we strip out the contribution from equipment sales and the effect of FX changes. In 4Q 2021, our service revenue grew by 6.1%. Underlying adjusted gross profit grew by 6%, and underlying adjusted EBITDA grew by 6.7% quarter-on-quarter. Our underlying adjusted EBITDA margin was 47.2%. Turning to slides 18 and 19. Service revenue growth is driven mainly by the delivery of the committed backlog and closing of acquisitions. Net additional area utilized during 4Q 2021 was 19,147 sq m. Excluding acquisitions, move-in has been at a similar level for the past 5 quarters. The first quarter of each year is usually the seasonal low.
In the current month of March, move-in has also been affected by COVID-related lockdowns in a number of our markets. Accordingly, we expect move-in in 1Q 2022 to be slightly below the trend line. However, we still believe the move-in pace will pick up again once we see more certainty in the macro environment. MSR per sq m was almost flat in 4Q 2021 as compared with the prior quarter. For the full year 2021, MSR declined by 2.6%. In 2022, we expect MSR to decline further by mid-single digits in percentage terms. The MSR dilution from edge of town and BOT projects will continue in 2022, but we expect the decline to be more mild in 2023 and onwards. Turning to slide 21 and 22.
Our underlying adjusted gross profit margin was 52.5% for 4Q 2021, the same as in the prior quarter. As a result of higher coal prices, we are seeing thermal power tariffs increase by around 10%-20% across Tier 1 markets. We are passing on around half of the increased cost to our customers. However, we estimate that temporarily elevated power tariffs are a drag of around 1-1.5 percentage points on our profit margin this year. Turning to slide 22. During 2021, we brought 120,000 sq m of new capacity into service, comprising organic developments and acquisitions, but excluding BOT projects. Over the past few quarters, we've adjusted the pace of our construction to reflect the current environment. Accordingly, in 2022, we expect to bring around 85,000 sq m into service.
Our pre-commitment rate remains at over 60%. Assuming that on average, 90% of capacity is saleable, we currently have around 46,000 sq m under construction, but not yet pre-committed, equivalent to around two quarters' new bookings at the current sales run rate. Turning to slide 23. Our CapEx for FY 2021 was RMB 13.7 billion, consisting of RMB 9.7 billion organic CapEx and RMB 4 billion for acquisition consideration. The organic CapEx includes around RMB 1 billion for land banking, which is not categorized as acquisition for accounting purposes. As at the end of 4Q 2021, we had a liability of around RMB 2.1 billion on our balance sheet in respect of deferred and contingent consideration payable for acquisitions which had closed before the year end. Looking at our financing position on slide 24.
At the end of 4Q 2021, we had RMB 10 billion or $1.6 billion of cash on our balance sheet. Our net debt to last quarter annualized adjusted EBITDA ratio was 6.3x . Our effective interest rate for the whole of 2021 was 5.5%, compared with 6.6% in 2020. During 1Q 2022, we successfully raised $620 million through the issue of convertible senior notes with a 0.5% coupon and seven-year tenor. With all the refinancing, we have successfully extended the tenor of our project debt. Over the next 10 years, project debt repayments average around RMB 2 billion per annum. Turning to slides 25 and 26.
As at the end of 2021, we had around 320,000 sq m of area utilized and around 235,000 sq m of total backlog. Assuming that we complete all the existing projects, deliver the backlog and sell out the small amounts of remaining inventory, our revenue- generating area would almost double from today's level to over 600,000 sq m. This is without initiating any new projects. The cost to complete all the existing projects is around RMB 13 billion, which we could finance with our existing resources. Turning to slide 27.
For the full year 2022, we expect our total revenue to be in the range of RMB 9,320 million-RMB 9,680 million, and adjusted EBITDA in the range of RMB 4,285 million-RMB 4,450 million, which implies a margin of around 46% at the midpoint of revenue and EBITDA ranges. We expect our CapEx to be around RMB 12 billion, out of which RMB 6 billion is Mainland China organic CapEx, RMB 2 billion relates to regional expansion, and RMB 4 billion relates to acquisition consideration plus land banking. We would now like to open the call to questions. Please, operator.
Thank you. If you would like to ask a question, please press star and one on your keypad. And if you'd like to cancel that request, you can press the hash key.
For the benefit of all participants on today's call, please limit yourself to two questions. If you have more questions, please re-enter the queue. Once again, that's star and one for questions. Your first question today is from the line of Yang Liu from Morgan Stanley. Please go ahead.
Yeah. Thanks for the opportunity. I have two questions here. The first one is, could you please share your latest observation on demand? We see several new changes. More public cloud and internet companies reported their recent earnings, and we also see a new round of COVID in China, et cetera. What is the incremental change on the demand side for both moving and also new order for new sales? The second question is, we see Chinese government released the East Data, West Computation initiative. What is the implication to GDS, especially given GDS has a long-term Tier 1 market strategy? Thank you.
Okay. Let me answer your question, Yang Liu. Thank you. Number one, about demand side. I think as I just mentioned, the demand still maintain the similar level of last year. This is based on our market observation. The demand profile is changed. As I just mentioned, in the last two quarter, we mentioned the demand will be shifted. The profile will shift from the large cloud to a lot of the internet, and enterprise, and financial institution. This is happening. If you remember a couple of quarters ago, we mentioned the demand. We already told the market the demand is shifted. The demand level is still maintained. That's our conclusion. That's why I think if you..
I just mentioned our new order booking profile is starting to maintain the trend, right? This is the fact which I tried to mention. The second question is moving, right? The moving, I think it's early to talk about it. It's too aggressive to talk about it. Because it's too much macro and micro impact to the customer moving condition, like COVID lockdown and all those. Supply chain issue is still there. I think the, n ow is a little bit too early to give this a positive way, but we still will see once some condition improved. I think I believe the customer will catch up. Because the demand is real, and they are just waiting for some outside condition improved, like supply chain and lockdowns condition.
Another question.
Another question?
Yes.
East Data, West Computation.
东数西算.
Okay. The second question, yeah, East Data, West Computation, right? The government
East Data, West Computation.
East Data and West Computation. I think it's good news for us. Number one, the government still encourages the new infrastructure, right? This is good news. Another good news for GDS is we talk about this. We read the government policy as two parts. One is East Data, right? This means government finally recognized low latency product is very necessary, right? This means government knows the demand will continue increase in the, let's say, Tier 1 market, low- latency product.
On the other hand, we understand the government wants to encourage the people to put more, let's say, core data in a renewable energy source location, right? It has a lot of renewable energy source. We believe GDS is working very closely with the government and our clients. I think GDS has already demonstrated we have the capability to catch up all kinds of opportunities in the future. Another impact is, I'll try to explain, that this new policy was already introduced one year ago, right? Now it's more pretty firm. It's a guidance, and needs time.
I will say GDS, it will not impact any of our resource which we are already on hand. This is my understanding of the government policy.
Thank you.
Thank you. The next question is from the line of Tina Hou from Goldman Sachs. Please go ahead.
Hi, thanks management for your time. I have two questions. The first one is in terms of, let's say, the next three years, from 2023 to 2025, where do we see, kind of, our growth rate? Is it more stabilizing at around like 20-something percent? Or do we see when all of these near-term uncertainties or headwinds have dissolved, we can see an acceleration of our revenue growth as well as the EBITDA margin situation? Do we see maybe going forward again, continued EBITDA margin improvement after the short-term electricity or coal price inflation? That's number one. The second question is regarding our M&A strategy this year. Noticed that management guided for 19,000 sq m of organic sales this year. So, just wondering what's our M&A strategy this year. Thanks.
I answer the question. Number one is the base. I think we set up the base. Let's say every year we increase the new booking. It's around 90,000 sq m. This is organic, right? We still consistent to give the guidance on that, and we are confident for that. This is in the last 12 or 18 months, the macro environment, which is not very good, but we're still confident to maintain this level of the growth, right? This is our base. Of course, we don't estimate any. We don't give any upside on that.
We believe if the government policy or macro environment improved, I think the market will accelerate. Now we are slightly, let's say confident for the future, next five years, next three years, because we see the central government encourage the economy again, right? Recently, Vice [audio distortion] Mr. Liu, h e released a very good policy to the market. We think, we believe this will encourage all the internet company or cloud company or enterprise company will restart their business plan, right? This is number one, right? Above 20% growth definitely is our base. The second question?
M&A strategy.
Yeah. M&A, I mean, as a tools, is a very important for us. Last 2021, as we just mentioned, we are more focused on to use the M&A, as a tools to acquire more valuable asset, land and carbon quota, with the carbon quota. Because in the Tier 1 market, we think, we believe, because of the carbon neutral policy is a main policy. In the Tier 1 market, in the next few years, the resource will getting more tight than before. This but our customer demand in Tier 1 market still very strong. In order to maintain the growth profile, the resource qualified resource, enough resource is much important than before to support our growth.
That's why M&A in the last year, we more focused on the acquire the valuable asset and resource. Now, this year, we will more focus on some project which have even more mature asset we will focus on. M&A, as we mentioned the last couple of quarter, GDS think in the next 18 months, even 20 months, it's good opportunity for us to acquire more small platform even. We are open to see all kind of the opportunity to acquire the project, even platform. This is what we can give the message to the market right now. I think we follow up, we're watching all the kind of opportunity right now.
Our pipeline maintains very strong.
Okay, thanks, William.
Thank you. The next question is from the line of Jonathan Atkin from RBC Capital Markets. Please go ahead.
Thank you for taking the question. It's Bora Lee on for John. First of all, I was wondering, have you been seeing any changes in the customer decision process for leasing uptake? What impact are government actions having on their IT decisions? Secondly, on Malaysia and Indonesia, I'd be curious as to the puts and takes of customer interest, given perhaps customer-specific challenges and the power challenges that Singapore is experiencing.
The leasing uptake and the government decision.
Okay. Hey, Dan, you answer the question?
I couldn't hear the first question clearly. William, why don't you answer that customer interest in Southeast Asia, or asked about Malaysia and Indonesia, your dialogue about that. I just tried to check first question.
Yeah. As I, well, as I just mentioned, I have been in Singapore almost one month because to keep developing this region's business. Frankly speaking, I'm very excited about the whole momentum in this region. It's very active. I met a lot of the private equity guys and a lot of our customers here. The reason is because I met a lot of private equity guys because they are very encouraging me because they think there's more unicorns in this region happening right now. On the other hand, our customers, our internet-based customers, I met a lot of their business people in this region. They all increase their business in this region significantly in the next few years.
That means the future demand in this region definitely will encourage us to more aggressive in this region. Our customer demand in terms of the real demand, right? In short term, I have to say we definitely will get some result in a short term and second half of this year. Verbally, we already get a couple of customer commitment in this region.
Bora, can you please repeat your first question?
Sure. I was wondering if you've been seeing any changes in the customer decision process for taking up leasing, and then what impact are government actions having on your customers' IT decisions?
I think definitely our customer they have their own IT logic, right? This is even if you look at the last couple years, our customers, they have their own philosophy and deploy logic. This cannot be changed in short term, right? That's why GDS always follow up our customer criteria first and our customer logic in terms of their business logic and their IT logic. I think. Of course, we also believe carbon neutral will be the future. Our customer very smart. They know how to separate their very cold data to remote place, which they already do, right? I think this will not change our customer behaviour a lot.
It's naturally when the IT grows, more data coming, we still believe the Tier 1 market, low- latency market demand is still very strong. On the other hand, the cold data will significantly increase as well. This is a different product, different demand, so it needed a different product to respond. That means that's my understanding.
Great. Thank you.
Thank you. The next question is from the line of Joel Ying from Nomura. Please go ahead.
Thank you for taking my question. I have two questions. The first one is, as we talking about a lot about the M&As a lot, so I would like to understand, what is the funding position at this moment, and do you actually need more capital and how to raise the money in future? The second one is about the margin guidance. I think the major reason for the slightly weaker margin growth, sorry, the EBITDA growth compared to revenue is about the utility cost. Anything else rather than the utility can we see potential risk for the margin side this year? Also, like, you know, if any extra cost for the green energy side that could happen. Thank you.
Yeah.
Yeah. William. Hi, Joel. I'll answer your questions. First of all, I'll just make a general comment, which is that, if there's an opportunity which is good enough, we will most definitely find a way of obtaining the financial resources. If you look what we've done historically, we've raised capital in a variety of different ways. We've worked with sovereign wealth fund and kind of programmatic joint ventures. We've worked with Chinese private equity funds, CPE in undertaking certain project developments. I mean, recently we raised capital privately from Sequoia China Infrastructure and from a sovereign wealth fund, and also with support from our long-standing and largest shareholder, STT GDC.
I think the interest from private capital providers in working with GDS is very high. T hose dialogues are going on all the time. I really don't think that access to capital in any way is gonna be a constraint in stopping us from doing what we wanna do and what we think makes strategic sense.
I added some color on that. I think we are in midterm, we don't worry about our capital. We have enough capital to grow our business plan. On the other hand, if some good things happen, let's say, we needed capital, we are never worry about that. We have a different way. We have the capability to access the different type of the capital. We already demonstrate we have this kind of capability in the last six or seven years. We keep go to the market, raise money when we believe can create value for our customer, create value for our shareholder. We just issue private notes, CB, a few weeks ago.
There's great demand even in this market. We still can access easily, right? I think this is not the issue for us to access. We do have some big deals to try to do. A lot of the capital wants to help us to create the value for our shareholder, right? It's not an issue.
Yeah. On the
Thank you.
Your question about it is really kind of confusing. T he biggest factor behind revenue growth is move-in. T hat's one driver, which is not within our control, right? Because customers have flexibility on their move-in. That's part of the way that we work with customers and part of the value proposition. A ll of our backlog is absolutely rock solid. The data center capacity is there. It's prime capacity in Tier 1 markets. And it's really just a matter of some quarterly fluctuation in terms of the move-in. F or us to make a forecast about customers' likely move-in behaviour over the next few quarters is difficult. You know, the
We're always very conservative on that one assumption because it is outside of our control. You know, we've taken a view which I hope is a conservative view on move-in, and that's what reflected in the revenue. On the margin side, yeah, we see an interruption to our trend of many quarters and years of margin improvement. The biggest factor is the power tariff. It's, I believe, it's a temporary factor. You know, last October, the government liberalized power tariffs in China in the kind of wider range and float. Yeah, liberalize the wholesale power market. A t that time and until now the coal price has...
That reflected in price. I think this transition to a more liberalized market is still ongoing and probably will be for at least this year and maybe next year in different places. Eventually, I think these liberalizations are gonna lower power tariffs because it will enable us to exercise our purchasing power as a kind of large user in all the locations. The coal price will also, I think, revert to the mean. Once again, we took the view that for this year, that the power tariff remain elevated, and that really is the major factor behind the low margin.
Yeah. I can add a little bit color on that. Number one, about moving, if you look at the last six years, in a normal time, our customer moving is quite normal and on track. As I just mentioned, last 18 months, this is all the micro and macro environment impacts our customer, definitely. There's too much personal uncertainty condition impacts our customers' business. In general, I think if you look at the long-term point of view, the IT still grows, the digitalization has not changed. I think this in our view, is a short- term.
We believe if the macro condition get improved, our customer still will execute their original business plan even better. In our view, moving is a short-term issue, right? We will see. We hope everything will be improved in the next 12 months. We believe things getting better.
Got it. Thank you.
Thank you. Due to time limits, please ask that you limit yourself to one question per person. The next is from the line of Michael Elias from Cowen and Company. Please go ahead.
Great. Thanks for taking my questions. So just really quickly, you know, we've seen some volatility in the Chinese market. Just wondering, in terms of the private market valuations you're seeing for data center assets, have you seen any changes there? And then also, I know you've mentioned that you have different ways to finance M&As to the extent you wanted to move forward with that. But just as we think about your leverage, you know, can you give us a sense of what the upper bound or what the maximum leverage you'd be able to put on the or willing to put on the businesses? Thank you.
Would you like also?
That might be we did a lot of acquisitions in the past eight months, and they were good ones. Yeah, I'd say the private market valuations have come down. Of course, sellers would argue that the public market multiples should be ignored because they're gonna go back up, right? We hope and expect that they will. You know, private market always gonna be priced relative to the public market multiples. There are other buyers. There's still competition for these opportunities. You know, we've been very selective. It's very clear what we were looking for, primarily data center projects in Beijing and Shenzhen and land with energy quota in the surrounding areas of all the Tier 1 markets.
We were able to, you know, close the deals or, you know, enter into definitive agreements for those deals on mid- to high-single-digit multiples. You know, we're talking about the acquisition price plus the cost to complete divided by estimated stabilized EBITDA. The question about leverage, we always finance our data centers with project finance. Our first objective is to allocate cash to capitalize data center projects and then to put in place project finance as early as possible so that each project is fully financed in terms of capital allocated to it and debt.
As I mentioned before, if we debt finance an organic project, say at 60% debt to total project cost, when that project is stabilized, it will translate into something like 3x-4x debt to EBITDA, which I think is a quite acceptable level. Of course, before then, the debt is incurred, and the EBITDA is generated later. The consolidated net debt to EBITDA is not what we target, it's the outcome. It's the sum of all the projects. Some of them are stabilized and have net debt to EBITDA of, you know, around 3x . Others are ramping up. You know, they're fully committed. They are on a journey to the same end result.
Right now, they might be at very high leverage because, you know, the debt has been incurred, but they haven't yet reached the stabilized EBITDA. Then, of course, we've got debt incurred for projects under construction, where there's also a very high pre-commitment rate of over 60%. The important thing is that all of these projects in Tier 1 markets have been de-risked with pre-commitments and are at various stage of development, which will end up in the same place, which is highly cash generative, highly profitable. Our consolidated net debt to EBITDA does fluctuate up and down. It was down after the Hong Kong IPO. It's up now because, you know, we made a decision strategically to allocate capital to securing a lot of development pipeline.
If you were to add back the value of our development pipeline, if you were to adjust our enterprise value and say, "Look, there's a hidden asset here," then you know, our net debt to EBITDA would be somewhat less than it appears. I just you know, hopefully investors would keep an eye on that. W e are somewhat sensitive to this because we appreciate that equity investors look at this. W hatever the level, if it's 6x or even if it goes higher to 7x, it is very comfortable because what I said, it's just the outcome of a whole series of projects which are soundly financed with all the capital allocated in the reserve and the project finance secured and in place.
Thank you. Appreciate the call.
Thank you. The next question is from the line of Edison Lee from Jefferies. Please go ahead.
Hi. Thank you. Thank you, management, for letting me ask question. My key question is about the organic growth going forward. I think you guys are guiding 85,000 sq m for 2022. I remember previously, I think some of you were talking about 100,000 per year. I just wanna get a better clarity as to whether you think going forward it will still be around 100,000, or you think 85 is the more reasonable number. Why would 2022 be 85 versus the previous expectation of a slightly higher number? Thank you.
That's wonderful.
Sure. Okay.
Yeah. Yeah. I think we still forecast always use a very solid way and a conservative way to give the market guidance. This is number one. I think I just say 90,000 sq m still is our guidance. Around the 90,000 sq m. This year we will more focus on the high-quality diversify our customer is number one. Number two, we also will focus on to get selectively customer to get more high-price customer. This is which we talk to our sales.
Let them give them the reasonable target, but we try to get more diversified our customer profile. This is always our target to pursue to diversify our customers. Always our consistent strategy, customer strategy, typically in current environment, right?
May I follow up to ask the question that what will be your retail versus wholesale mix of the incremental capacity in 2022? Will that be very different from before?
Yeah, I think we just showed last two quarters. We already got a profile mix a little bit changed. We think it's healthy. We still will focus on this strategy, right? Retail enterprise type customers now they are growing more faster than our expectation, which we think is good. Retail customers still will increase.
Okay, thank you. Is there a mix that you can share or any target on the mix between the two for this year?
Last quarter, 20%. Yeah. I think the last quarter is 20%, right? It's mixed at retail. It is representing 20%. Yeah. I think it will accelerate, and we target is 30%.
Sorry, is that target just for 2022?
Yes.
Okay, great. Thank you very much. Goodbye.
Thank you. The next question is from the line of Frank Louthan from Raymond James. Please go ahead.
Great. Thank you. Dan, you mentioned that power was impacting your margins. Can you discuss any other inflationary items pressuring margins, and how easily are you able to pass on inflationary costs to customers from new builds and so forth? And what sort of pushback are you seeing from customers on that? Thank you.
No, it really is only power. It's power and gross profit. Power, I think, is a temporary one. I think we mentioned before that if you look at our contract portfolio, around 65% of the capacity is with contracts where there is a you know separate power billing metering and billing, which of course would fluctuate exactly with the tariffs. If you look at the area which is actually revenue- generating today, billable, it's more like 50% is what we call unbundled and 50% bundled. You know, the situation is very dynamic and we're in the process of you know agreeing power purchase agreements and fixing tariffs with the grid companies and with the power generators in different locations.
The power tariffs are changing quite a lot. It's a really complicated exercise to pass this on to customers. It requires operationally, it's complex, and it requires a lot of reconciliation and confirmation with customers. You know, we're not passing it all on. To some extent, we make a decision to absorb it. In the medium term, which maybe is after one year, where we start to see the benefit of our purchasing power, this whole dynamic might reverse lower coal prices as well. In which case, we benefit. So we don't want to disrupt too much the arrangement with the customers because, you know, you win some and you lose some, right? Right now, we lose a bit. In the longer term, it may work the other way.
Okay, great. Thank you very much.
Thank you. The next question is from the line of Hongjie Li from CICC. Please go ahead.
Hi, management. Just a quick follow-up on the M&A question because about 30% of the CapEx in 2021 was used for M&A. Just curious in 2022, how much of the RMB 12 billion CapEx will be used to seek M&A opportunities? Thank you.
Yes. I think I said around RMB 4 billion. Yeah, as at the end of 2021, you know, we had some consideration relating to prior years' acquisitions which have not yet been paid, because we always try to structure the acquisition consideration with as much deferral as possible, and some of it's contingent linked to milestones and so on. I think we had about RMB 2 billion on our balance sheet that was deferred and or contingent from prior acquisitions. You know, there's some acquisitions which we did. There was one in particular we did in the first quarter of this year. I think we're looking at about RMB 4 billion to RMB 6 billion, I think. If I've got it right. Yeah, RMB 4 billion in 2022 for acquisition consideration.
Yeah. I have to add some color on that. I think that our revenue guidance not assume any acquisition, right? It can bring more revenue on that. We of course reserve the capital to do some acquisition, but not assume the revenue bring from the acquisition deal, right? There's still a lot of the opportunity, right? If the big opportunity coming, definitely, we just mentioned we have a different way, we have a lot of option to access the capital to get a deal done.
Okay, thank you.
Thank you. The next question is from the line of Albert Hung from JP Morgan. Please go ahead.
Thanks for taking my question. I'm asking a question on behalf of Gokul. The Guangzhou 100K sq m project acquisition, may I know what's the timeline for conversion from minority to majority stake? How much of the 100K sq m is developed already? What's the consideration price? Thank you.
Can I answer that? Okay. As Albert, it's a complex transaction because it involves a portfolio with a number of different locations, each of which is a separate approval, separate, you know, energy quota, or separate situation in terms of the land or the real estate. There are performance conditions which attach to each of them. I think that it may take a good part of this year, and it probably may either this year or it may even roll over into next year, before all the performance conditions are satisfied, for us to move from minority to majority. I mean, it could be sooner.
I mean, we're working in a very collaborative way with the seller to support them, you know, where appropriate, to try to get the things done. I think, as you know, part of the. There's RMB 2 billion of deferred consideration related to, you know, the remainder of that acquisition, because it is a very large portfolio. It's tremendously valuable.
Thank you. As there are no further questions, I'd like to now turn the call back over to the company for closing remarks.
Thank you all 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 or the Piacente Group Investor Relations. Thank you all. Bye.
This concludes this conference call. You may now disconnect your line. Thank you.