Singtel’s data centre arm, Nxera, announced a JV with Telekom Malaysia to build a 64MW DC in Johor Malaysia, the telco is to invest up to SGD684m in ST Telemedia Global Data Centres (STT GDC) through a KKR-led consortium.
Maybank gives its takeaways from post-announcement mgt call, that the management indicated DC capex in EM cost slightly less than USD10m/MW. The new Johor DC will use grid power from Tenaga and may consider shifting to renewable power at a later date. While AI workload demand is evolving and customer discussions are shifting from CPUs to GPUs, management noted customer demand has shifted from 5-10MW to 20- 30MW. It also noted that Nxera’s focus is on expanding within ASEAN/tier1 markets, and thus the STT GDC investment will give it much wider exposure. Capital outlay in both ventures are considered investments and thus is on top of the company’s FY25E capex budget.
While the target valuation paid for STT GDC is not disclosed, management noted that it was below 32x EV/EBITDA, which it fetched for its own partial DC divestment in 2023. Management committed to its guidance of SGD3-6 cents in valuerealization dividends on top of regular dividends even with the new investments announcement.
The house sees Singtel’s DC investments as a positive step. The telco has extensive experience of operating DCs as it already has ~8% market share in the highly fragmented Singapore DC space. Maybank believes AI has further accelerated DC demand as a typical Chat GPT search requires 10x more DC resources than a Google search. The house also thinks the new GPUs coming from NVIDIA need more power density (high KW/cabinet) and thus the requirement for modern DCs. GPU as a service also remains a focus area for growth.
According to Fortune Business Insights, GPU as a service market size is expected to expand at a CAGR of 36% by 2032 to USD50b.
Reiterate BUY; Dividends can be maintained
