Equinix is one of the leading data center real estate investment trusts (REITS) globally, with more than 200 data centers and nearly 10,000 customers that connect via Equinix locations. This company’s growth profile has improved year-to-date, with increased remote work and cloud data volumes.
- Using technologies such as free air-cooling systems, reused waste heat, ultrasonic humidification, evaporative cooling and low-power servers, energy efficiency is a core focus for the company. Equinix can help customers reduce the carbon footprint of their supply chains through energy efficiency, but, importantly, 92% of the power Equinix uses globally comes from renewable sources. All new centers are built to LEED silver building standards.
- Functionally, a data center REIT provides for network interconnection (for example to allow internet players such as Microsoft and AOL to exchange information). Lack of neutrality between these players created the need for independent players, providing a unique market niche which has become even more important with the fast growth of these so-called hyperscalers (Google, Microsoft, Amazon); these big technology companies have their own data centers, but because of their fast growth, they rely in part on so-called colocation providers like Equinix. These large customers also seek to become carbon-neutral, or even carbon-negative, per Microsoft’s recent pledge, making Equinix an aligned partner.
- With global reach, scale and steady and reliable growth for 17 years, Equinix has a strong balance sheet, pricing power and built-in business model resilience. Unusually, Equinix also owns the land for about 50% of its data centers and continues to buy more land assets, which provides insulation from rent pricing. Up to 90% of revenues come from subscription-bases services, providing high recurrent revenues. India, Mexico and Africa represent future growth areas.
Evotec is a global leader in the provision of contract research services, specifically at the pre-clinical trial stage of healthcare research.
- Evotec has two operating businesses: Execute (80% revenue), the pure fee-for-service business, which has experienced above market growth of 20% 5Y CAGR since 2015, and Innovate (20% revenue), where Evotec leverages its assets, know-how and market knowledge to create pre-clinical assets to sell to customers for further development. The Innovate division has attractive growth opportunities from milestones and royalties, creating an extremely attractive return profile to grow in to.
- Evotec has a diverse range of more than 800 customers and is technology-agnostic, being able to serve customer needs across small molecules, antibodies, biologics, advanced therapies and stem cells. With more than 70% of its 4,000 employees holding Ph.D.s, the company is strictly focused on innovation to address unmet healthcare challenges, and 100% of its projects are either first-in-class or best-in-class molecules.
- As medical science advances and pathophysiology is better understood, the landscape of disease becomes ever more fragmented; as a result, it is no longer feasible for biopharma companies to have a full suite of capabilities in house while also maintaining high capacity utilization. This is the economic niche that Evotec fills, providing the ability to have centralized, highly specialized, full-service drug discovery capabilities under one roof and at maximum capacity utilization, often allowing drugs a faster route to market. With a healthy funding environment and the rise of virtual biotechs, the outsourcing trend is unlikely to reverse, providing significant headroom for growth.
Established in 1987, TSMC is the world’s first dedicated semiconductor foundry, or semiconductor fabrication (fab) company. As essential components of most electronic devices and circuits, semiconductor chips are the building blocks of connectivity for all industries.
- In an era of undisputed importance and growth of the internet of things, this company has a leading role in enabling the growth of, and satisfying the demand for, advanced chips and ever-faster computer power by both consumer and industrial end markets.
- TSMC has extended its dominance in recent years to become the principal partner of the “fabless” chip design companies globally. It also has the critical advantage of being independent, and thus as a brand agnostic chip manufacturer, constantly thrives on process improvement.
- With scale and ability to continue to invest (currently to the tune of $11 billion per year) in leading-edge manufacturing facilities with unparalleled efficiency and low cost, Impax believes that TSMC is well positioned to produce solid returns on capital with little or no leverage and excellent financial discipline. Recent sales trends and revenue growth remain positive, demonstrating resilient demand for advanced semiconductors during a pandemic-induced downturn. A robust balance sheet and positive cash flow generation this year should help the company weather current disruptions in the global economy.
Pax Global Opportunities Fund Top 10 Holdings
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