While investors see a risk of oversupply in DCs within the region, Dunbar notes that risk of oversupply is limited. He also notes with “high confidence” that looking at the recent capital market transactions, a few of the companies in the private space will list soon.
“While some of the indirectly exposed names like Gamuda and Solarvest have ran up, DC is a multi-year theme and the DC-led accretion is likely to continue over the next five to seven years,” says Maybank’s Saifee.
Saifee names Singtel, Mapletree Industrial Trust (MINT), YTL Power, Sunway Group, Gamuda, Sembcorp Industries , Solarvest, Gulf Energy and CSE Global as key beneficiaries of Asean’s DC boom.
Saifee has maintained “buy” on SingTel, MINT, Sembcorp and CSE Global, with a target price of $3.70, $2.60, $6 and $0.60, respectively. He proceeds to discuss Malaysia’s dominance in the Asean DC space.
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Malaysian-based investors are concerned that power and water could be a constraint limiting new DC developments, and with other Asean markets boasting favourable conditions, Malaysia could lose its edge, he notes.
However, the analyst is of the opinion that the new DC going live in Malaysia will not be as many as announced and are likely to be spaced out and are unlikely to strain infrastructure.
Based on his estimates, at 1 gigawatt (GW) or 2GW DC infrastructure in Johor, DC water usage would be 3% to 6% of Johor water treatment infrastructure.
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“With improving data centre water usage effectiveness (WUE) and potential expansion in Johor water supply infrastructure, we don’t see water availability posing major challenges,” Saifee adds.
Furthermore, Dunbar believes that the bottleneck in DC builds can be attributed to the high lead time to secure electrical and cooling components as opposed to power and water or permit limitations.
Through its recent investor outreach, Maybank found that only a few investors are concerned with the risk of oversupply given the large announcements and high vacancy rates in markets such as Manila and Ho Chi Minh City.
On the other hand, several investors are concerned the new capacities being projected are mere announcements resulting in a share price rally but may not actually materialise.
Saifee is of the opinion that of the 6GW of announced new builds, only one third is under construction and committed, while the rest are in the early stages.
Saifee expects early-stage announcements to materialise, depending on demand, which can help prevent oversupply, while Dunbar notes that demand remains strong, led by hyperscalers and new builds can be easily absorbed.
