KUALA LUMPUR: RHB Investment Bank Bhd (RHB Research) believes the market has underpriced the potential from Google's investment in Sime Darby Property Bhd's (SD Property) Elmina Business Park (EBP), and almost doubled its target price for SD Property stock to RM2 a share.
It was trading 5 per cent higher today to RM1.41 a share.
The stock has gone up more than 20 per cent since the data centre in EBP was announced on May 23, 2024.
"We think the market has not fully priced in the upside potential of Google's recent announcement of its USD2bn investment in Malaysia. "The tech giant's announcement of RM1.74 billion in capital expenditure (capex) for the first Google DC and Google Cloud region may just be the beginning. "Our new target price reflects the incremental value of the contribution from the Google facility, as well as the faster turnaround of SD Property's industrial parks ahead," it said.
RHB Research raised its FY26 earnings forecast by about three per cent to reflect the initial contribution from Google DC, as the facility may only be completed in the second half of 2026 (2H26). Last month, Google announced its commitment to invest US$2 billion (about RM9.4 billion) in Malaysia.
The Google DC at EBP will power the tech giant's popular digital services, such as Search, Maps and Workspace. When operational, Malaysia will join the 11 countries in which Google has built and now operates DCs.
RHB Research has maintained a "Buy" call on SD Property, with a higher target price of RM2 from RM1.54 previously.
In a note today, RHB Research said it believes that there could be further investments for subsequent phases of the DC in EBP, which may be what the remaining RM7.5 billion is for, at a later stage.
It said while the initial Google DC is estimated to have a capacity of 80 megawatt (MW), the entire 19.83-hectare site earmarked for Google at EBP could accommodate 200-250MW, based on its estimate.
The DC by Google investment at Elmina Business Park (EBP) is expected to boost SD Property's total asset under management (AUM) significantly from RM4.4 billion currently.
The AUM currently includes a concession arrangement for Bandar Universiti Pagoh.
The firm believes that by financial year 2025 (FY26), the group's AUM may be worth RM6 billion to RM7 billion, which could generate a total recurring income of RM120 million to RM130 million at theoperating level.
Additionally, RHB Research also noted that SD Property is well-positioned to capture the prevailing investment wave, driven by global tech giants, in the South-East Asia region.
The company currently has five industrial park projects with a remaining total land area of more than 809.37 hectares.
"We believe that the basic infrastructure facilities are ready at these industrial sites, since projects are ongoing. "SD Property is an experienced player in industrial development, and the segment now accounts for 30 per cent of its total property sales," it said.