Sime Darby Property Berhad’s (SDPR) recent venture into hyperscale data center (HDC), could potentially yield ≈9% from 2H26 and enhance growth.
Maybank Investment Bank (Maybank IB) today said they maintain their earnings forecasts but raised SDPR’s TP to MYR1.40 (+27 sen), reflecting improved earnings sustainability and stability over the longer term and upgraded the counter to BUY (from HOLD).
Awarding data centre construction works to Gamuda
SDPR had issued a letter of award to Gamuda Engineering S/B (a 100%- subsidiary of Gamuda [GAM MK, BUY, CP: MYR6.05, TP: MYR6.85]) for the construction, completion, testing, and commissioning of a hyperscale data centre covering approximately 49 acres in Elmina Business Park (EBP) for MYR815m.
The construction work will commence in 2Q 2024 and is slated for completion by 1Q 2026. Jumping onto the data centre bandwagon.
To recap, SDPR has entered into an agreement to build and lease a hyperscale data centre and its associated structures in EBP to Pearl Computing Malaysia S/B (100%-owned by Raiden APAC Pte Ltd).
The latter is a company incorporated in Singapore and part of a multinational technology corporation headquartered in the US. Upon completion, SDPR and Pearl Computing will enter into a 20-year lease valued at up to MYR2b, with option to renew for two additional 5-year terms.
Positive on deal; potential earnings enhancement
The 20-year lease will provide stable and predictable recurring income over the longer term, as it helps to cushion any earnings downturn from the more cyclical property development business.
Assuming operating expenses at 25% of revenue, Maybank IB estimates a cap rate at about 9.2%, translating into an annual net rental income of MYR75m. Their FY26E net profit forecast could enhance by +5.6% (half year impact). Rising demand on SDPR’s industrial products (which have better margins) and its involvement as data centre asset owner should sustain interest in the stock, Maybank IB believes.
