• On 30th November 2024, Sime Darby Property (Simeprop) entered into a significant agreement through its wholly-owned subsidiary, Sime Darby Property (EBP Asset II) Sdn Bhd (SDP EBP II), to design, construct, and lease a data centre facility to Pearl Computing Malaysia Sdn Bhd, a wholly-owned subsidiary of Raiden APAC Pte. Ltd. (Pearl Computing).

• Following the second agreement in data center development, the total value of rental payable to Simeprop estimated up to RM5.6bn (first agreement RM2bn), which could potentially create a sustainable income stream starting in FY27, in our view.

• Maintain a BUY call with a target price (TP) of RM1.73, pegged at 1.1x P/B to the FY25F BVPS of RM1.57.

Simeprop Entered into Second Data Centre Agreement

On 30th Nov 2024, Sime Darby Property (Simeprop), through its whollyowned subsidiary, Sime Darby Property (EBP Asset II) Sdn Bhd (SDP EBP II) inked a build-and-lease deal with Pearl Computing Malaysia Sdn Bhd, to expand data center facilities. The project will be built on an approximately 77-acre plot of land located in Elmina Business Park Phase 2, with construction to be completed in alignment with the specifications provided by Pearl Computing. The project is expected to be completed by the end of FY27. The data centre will be strategically positioned near Pearl Computing's first data centre, currently under construction and set for completion in early FY26. As per the terms of the Agreement to Build and Lease (ATBL) and the Lease Agreement, SDP EBP II will lease the completed facility to Pearl Computing for an initial term of 20 years, starting upon the completion and delivery of the project. The lease includes provisions for two further 5-year extensions, providing additional long-term revenue stability. The total rental value over the initial 20-year term is estimated to reach up to RM5.6bn, underscoring the substantial scale of the project. Revenue from this lease will begin to be recognized in FY27, upon the commencement of the lease.

Long-Term Stability and Diversification

We are optimistic on the long-term and stable recurring income expected from the lease, which will provide a strong buffer against the inherent cyclicality of the property development sector. This deal positions Simeprop to benefit from the growing demand for data storage and computing infrastructure in the future.

Maintain BUY with a TP of RM1.73

We are maintaining our BUY call on Simeprop with a target price of RM1.73. This is pegged at 1.1x price-to-book (P/B) ratio (based on KL Property Index peak cycle) to the FY25F book value per share (BVPS) of RM1.57. We believe this is fair given Simeprop’s robust outlook in the property segment and recurring income moving forward.

Source: BIMB Securities Research - 3 Dec 2024