KUALA LUMPUR: Google's investment in the phase 2 data centre in Elmina Business Park (EBP) in Selangor might be between RM4 billion and RM5 billion, depending on the size of the land and the overall rental value.
The facility's capacity could be between 200 and 250 megawatts (MW), according to RHB Investment Bank Bhd (RHB Research).
The research firm said that Google will invest a total of RM5.5 billion to RM7 billion in EBP, which includes the RM1.5 billion to RM2 billion investment for Phase 1 (about 100 MW).
"This is a boost of confidence for the growth prospects of EBP and should entice more manufacturers to set up their production facilities in the area. Already, EBP is seeing significant interest from many ancillary industries along the DC supply chain, such as cooling tower manufacturing.
"We expect EBP and the Elmina township to continue to be a major property sales contributor (now accounting for 25-30 per cent of annual property sales) in the coming years," it said.
RHB Research noted that both phases 1 and 2 could generate RM380 million in rental income per year and contribute around RM170 million to RM189 million to total net profit.
The firm has maintained a "Buy" call on Sime Darby Property, with a higher target price of RM2.33 from RM2.20 earlier.
"We are upbeat on Google's second investment for a data centre in EBP, which is larger in value and capacity than the first one.
"Sime Darby Property's earnings growth profile will change from 2026-2027 onwards, and the journey ahead could be exciting—as we expect a data centre fund to potentially be set up and the listing of a real estate investment trust (REIT) to be in the pipeline.
"We also do not rule out the possibility that Sime Darby Property may acquire some industrial properties to grow the size of its asset portfolio faster," it noted.
Public Investment Bank Bhd. (PublicInvest) said that Sime Darby Property's second data centre is likely to cost the group around RM3 billion to build.
The firm said this estimate is based on the first deal, which it believes had a construction cost of around RM815 million.
Sime Darby Property's subsidiary Sime Darby Property (EBP Asset II) Sdn Bhd has partnered with Raiden APAC Pte Ltd (owned by Google) to build and lease data centre facilities and associated structures in Elmina Business Park Phase 2 in Selangor.
PublicInvest noted that the group's latest deal is more than double the earlier one announced in May in terms of lease value, amounting to up to RM5.6 billion.
The lease is for a duration of 20 years commencing from the completion and delivery of the project, with options to renew the term for an additional five years upon expiry of the initial period.
However, details such as investment costs and projected returns are not available at this time.
"The second data centre asset is estimated to yield about RM280 million in rental income per annum, and hence, together with the first data centre, both are estimated to contribute about RM380 million in rental income to the group's revenue per year.
"We estimate the construction cost for its second data centre asset could be around RM3 billion, which is unlikely to be a problem, given its low net gearing currently at about 0.2 times," it said in a note.
The firm has kept its earnings forecast unchanged for now, pending further details.
It anticipates that the group's earnings quality will improve, as data centres alone could generate high rental income.
PublicInvest has maintained a "Neutral" rating on Sime Darby Property with a target price of RM1.45, as it believes the positives are largely factored in.