TdC has entered into a conditional SPA with EPF for the proposed acquisition of a 13-storey purpose -built office building together with 95 card park bays known as Bangunan KWSP for a total cash consideration of RM62m. We view this positively as this proposed acquisition will allow TdC’s state-of-the-art Menara AIMS to expand as it is currently running at 98% capacity utilization on the back of robust demand. Bangunan KWSP is located diagonally opposite to Menara AIMS and this would greatly ease operations and logistics. Reiterate BUY with unchanged SOP-derived TP of RM5.61.

NEWSBREAK

The acquisition. TdC board announced that AIMS Data Centre Sdn Bhd, a wholly owned subsidiary of TdC, has on 11 Jan 2022 entered into a conditional sale and purchase agreement with Lembaga Kumpulan Wang Simpanan Pekerja or EPF, for the proposed acquisition of a 13-storey purpose-built office building together with 95 card park bays known as “Bangunan KWSP Changkat Raja Chulan” (Bangunan KWSP) for a total cash consideration of RM62m, upon the terms and conditions as set out in the SPA.

Rationale. The proposed acquisition will enable TdC to increase space for expansion of operational facilities. The management of TdC is of the view that Bangunan KWSP is in good condition to cater for such operational activities.

Purchase consideration for Bangunan KWSP of RM62m had been arrived at on a willing buyer willing seller basis after taking into consideration the market value as appraised by 3 independent registered valuers, whereby the purchase consideration is within the range appraised. The purchase consideration will be satisfied in cash via internally-generated funds.

Approvals required. This deal is not subject to the approval of the shareholders of TdC. However, the SPA is subject to Economic Planning Unit approval and the Statutory Approvals being obtained.

Estimated timeframe for completion. Barring any unforeseen circumstances and subject to fulfilment of the conditions precedents of the SPA, the proposed acquisition is expected to be completed within 3 months from the unconditional date.

HLIB’s VIEW

We view this development positively as this proposed acquisition will allow TdC’s state-of-the-art Menara AIMS to expand as it is currently running at 98% capacity utilization on the back of robust demand.

Bangunan KWSP is located diagonally opposite to Menara AIMS (see Figure #1) and this would greatly ease operations and logistics. Besides data centre, TdC also plans to house its supporting services in this building. TdC’s early expectation is to have the first phase of Bangunan KWSP to be ready-for-service by end of 2023.

Reiterate BUY with unchanged SOP-derived TP of RM5.61 (see Figure #2) with WACC of 8% and TG of 1.5% for domestic telco business. We like TdC as its retail is gaining momentum on the back of reach expansion and undisputable high value products. Also, data centre is expanding resiliently as IT outsourcing, cloud computing and virtualization are widely adopted. GBS is no longer a drag and expected to perform better as demand recovers.

Source: Hong Leong Investment Bank Research - 12 Jan 2022