KUALA LUMPUR: Sime Darby Property (SD Property)'s share price continued its rally, hitting a high of RM1.30 a share today, as it looks set to be the country's first property developer to own a hyperscale data centre (DC).
As at 10.45am, SD Property was up 5.17 per cent to RM1.23 a share. Some 40.5 million shares changed hands.
Yesterday, the company announced that it will develop and lease its first data centre in Elmina Business Park to Pearl Computing Malaysia Sdn Bhd, a unit of a multinational technology company, for RM2 billion.
RHB research in a note today said the move will likely lift the profile and land prices in Elmina Business Park, while the rental income from the facility should add to its pool of recurring income over the long term.
"The industrial segment currently accounts for 30 per cent of total property sales. Given its strategic exposure, SD Property is well-positioned to ride on the wave of DCs being set up in Malaysia. To fund a portfolio of DC facilities in the future, we think management may replicate the Industrial Development Fund model used for its joint venture project with LOGOS in Bandar Bukit Raja," it said in a research report today.
RHB research raised its target price on the stock to RM1.54 a share, from RM1.42 previously and maintained its 'buy' call.
Besides Elmina, the firm also suggested that it is possible more DCs will be established in SD Property's other industrial parks including Bandar Bukit Raja, Serenia Industrial Park, Hamilton Nilai City and Bandar Universiti Pagoh.
Based on discussions with some industry players, the firm said the expected rental yield from a DC may be around eight per cent, which means annual rental revenue for SD Property may amount to RM8 million.
According to RHB research, SD Property will likely tender out the construction contract for the DC, and also needs to provide the necessary infrastructure including fibre network and perhaps also additional power supply to the site."The cost of land for SD Property should be cheap, but upfront costs to invest in this DC will be sizeable.
"In our view, SD Property's balance sheet is sturdy enough to enable it to undertake the financial commitment, since its net gearing is only at 0.24 times presently," the firm added.
RHB research maintains SD Property's earnings forecast, as the estimated rental income is considered minimal and should only begin, at the earliest, from financial year 2026 (FY26) onwards.