• An upcoming new data centre (DC) in Elmina Business Park (Elmina)? Sime Darby Property (SDPR MK, BUY, TP: MYR1.54) announced yesterday that it is building and leasing a hyperscale DC (and associated structures) at Elmina to Pearl Computing Malaysia (a subsidiary of Raiden APAC, which is part of a US-based multinational technology corporation). This DC project is set to break ground in 2Q24 with a targeted completion in 2026. We do not discount the possibility of local listed contractors participating in this project.

• Potential capacity and cost to build the DC in Elmina. As a benchmark, Yondr Group’s DC campus (early phase now being constructed) is being set up on 72.8 acres of land in Johor’s Sedenak Tech Park (STeP) and will offer total capacity of 200MW when completed, which translates into one acre potentially catering for 2.7MW of DC capacity. With the DC in Elmina being built on 49 acres of land, we estimate the total DC capacity to be at c.130MW by applying the acre to MW of DC capacity assumption above. Using the lowend range of a MYR20m budget per MW to build a DC, we calculate this DC may cost roughly MYR2.6bn.

• Potential beneficiaries. As SDPR will likely tender out the construction contract for the DC in Elmina, we have identified a few names that could benefit from this project. They include contractors with DC experience, namely Sunway Construction (SCGB) and Gamuda (GAM). SCGB has one DC job worth c.MYR750m in Selangor and another >MYR1bn one in Johor while GAM has clinched two DC jobs worth MYR500m in total from AIMS Group.

• Additionally, we believe HSS Engineers (HSS MK, NR) could stand a chance in securing project management contracts pertaining to DCs. In 2023, HSS was awarded a MYR8.8m project management services contract for a DC in STeP by Yellowwood Properties. It also landed a MYR8.9m contract during this period for professional engineering design and consultation services for a DC developed by Infinaxis Data Centre in Cyberjaya.

• Competition risks. We acknowledge risks in the form of competition stemming foreign-based contractors with track records in building DCs in Malaysia, eg Leighton Asia (a CIMIC Group company) was appointed as the contractor for DCs that are likely located in Cyberjaya and Johor. We are of the opinion that contractors that can stand out the most during this DC boom are the ones that can accommodate short turnaround times needed (depending on clients’ needs), eg GAM managed to complete the 8MWcapacity AIMS Cyberjaya Block 2 DC in nine months utilising its nextgeneration digital industrial building system or IBS solution.

• In our view, the latest DC in Elmina reaffirms Malaysia’s attractiveness as a data centre hotspot, with the country’s DC market expected to reach USD4bn by 2027 from USD1.8bn in 2023, according to Arizton. A key risk: The influx of contractors into DC construction, which may compress margins.

Source: RHB Securities Research - 24 May 2024