EFTA01389033.pdf

Deutsche Bank Markets Research Rating Company 31 October 2016 Buy CyrusOne Forecast Change North America United States Reuters Doc.rnt.ero ecnenge Te.-ket Price at 31 Oct 2016 IUSD) 44.61 Financial CONE.00 CONE US NMS CONE Price Target 57.00 REITs 52-week range 55.66 . 33.61 Demand in not dead, in fact it is very io, Ci A 744,, Elcr;, mrie, ( Research Ana ct Research Associate much alive CEO transition mars an otherwise perfectly fine quarier With sentiment turning negative, the market appears to be searching for reasons to sell and CONE's unexpected CFO transition provided a reason in 30. 1.8100t Price 59.00 to 57.00 I -3:4% While the prior CFO's short tenure raises questions, we think liquidity is in great shape with no need to raise equity any time soon, which should help in a FF0 IUSD) 2.56 to 2.60 I 1.3% smooth transition. Op results in the la were also a positive. While the $27MM Saint DemmeDant of 30 bookings fell short of the last 3 Os, it was CONE's 4th best ever and the outlook was about as positive as we've heard (sales funnel 2x the 20 level). !Nice/price ruletivo Also, though churn will be above trend in '16, the '17 outlook calls for improvement to the low end of the historical guidance range. Reiterate Buy. Leasing activity and pipeline reflective of strong demand CONE signed a respectable $27MM of annualized GAAP revenue (inc. $14MM reported with 20 results). While this was below the level achieved in the last 3 quarters it was the 4th best print on record and does not include another 25kcsf in early 40 which we estimate will add -$4MM annually. New lease rent/KW came in at $126 vs. the prior 4 0 avg of $147, given the previously- —CviusOn• announced wholesale pre-leasing activity announced in NoVA. Excluding this SOP 0001NOIDC IP•bard) activity• bookings over the balance of 30 averaged $197/KW. Total utilization Periormancell'o) Irn 3m 12m was 85%, while the stabilized rate was 93%, both 100bps higher than 20. Churn of 3.8% was higher than recent quarters, and included 1.4% proactively Absolute -6.2 -18.6 26.4 taken back by CONE, although it was in-line with the 2H outlook. Initial 2017 S&P 500 INDEX -1.9 -2.2 2.3 commentary suggests a reversion back to about 6% churn. sem .en Updating etaintares folk/vying s() earnings We have updated our model to reflect 30 results, revised guidance, and our updated outlook. Our 2016 normalized FFO/sh estimate moves to $2.60 from $2.56, FAD/sh moves to $2.22 from $2.44, and adjusted EBITDA moves to $274.9MM from $275.3MM. For 2017, normalized FFO/sh moves to $2.96 from $2.95, FAD/sh moves to $2.80 from $2.90, and adjusted EBITDA moves to $339.2MM from $337.7MM. Our FFO estimates increase to reflect updated run-rates and one-time items, while FAD falls on higher straight line rent. Valuation cox( risks We are lowering our TP to $57 from $59. Our TP is based on a 50:50 blend of our FAD-based target and our EBITDA-based target. Risks include the success of CONE's dev efforts, heightened operating risk vs. peers in light of higher tenant and geo concentration, and higher SG&A business model. Year End Doc 31 2015A 2016E 2017E 0 FFO 049 0.63A 70 FFO 0.51 0.67A - 30 FFO 0.57 0.67A - 40 FFO 0.61 0.62 - FY FFO (USW 2.18 2.60 2.96 P/FFO (x) 14.7 17.2 15.1 Dividend yield I%) 3.9 3.4 3.7 sown onenessniesinew roarer ems Deutsche Bank Securities Inc. Distributed on: 01/11/2016 04:06:54 GMT Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 057/04/2016. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0093185 CONFIDENTIAL SDNY_GM_00239369 EFTA01389033