SNS poised to benefit from AI and growth of data centres

PETALING JAYA: SNS Network Technology Bhd’s robust financial performance is expected to be supported by new artificial intelligence (AI) server sales and continued growth in its existing information communication technology (ICT) business.

According to Rakuten Trade Research, growth in the group’s ICT business will be backed by consumer-device refresh cycles and ongoing digital transformation in education and commerce.

The research house also noted that SNS serves as a crucial link between server manufacturers and buyers, facilitating AI adoption and integration.

“Recognising the potential of AI across various sectors in Malaysia, SNS positions itself as a facilitator of AI adoption.

“Acting as a liaison between server manufacturers and buyers, SNS plays a pivotal role in enabling AI integration in Malaysia,” the research firm said in a report.

Moreover, SNS excels in other segments such as data centre fit-out, testing, commissioning and operations management, though it is not directly involved in construction.

“By offering a comprehensive suite of services, including cloud computing, data analytics and AI workload optimisation, SNS addresses diverse business needs.

“Its recent partnership with Supermicro aligns well with Supermicro’s expansion plans in Johor, further solidifying SNS’ position in the market,” Rakuten Trade Research said.

The research house added that the country is now an attractive destination for data centre investments, supported by favourable conditions, including an abundance of land and power resources, excellent international connectivity and supportive government policies.

“A report from real estate company Juwai IQI highlights Malaysia as the fastest-growing market, projecting a remarkable 600% growth in AI-driven data centre expansion over the next five years,” Rakuten Trade Research said.

The research house said that Malaysia currently hosts over 40 operational data centres, each with capacities ranging from 100 megawatts (MW) to 150MW.

Driven by low land and energy costs, upcoming data centre projects indicate an anticipated additional capacity of 1,400MW over the next five to 10 years.

“Considering that each graphics processing unit (GPU) server can only support 10 kilowatt of data centre usage, the potential for SNS to seize opportunities in this expanding market is significant,” the research outfit said.

With an average selling price per unit of RM1.5mil for servers and a gross profit margin of 15%, Rakuten Trade Research said the company anticipates robust revenue generation.

As of the fourth quarter of its financial year 2024 (4Q24), SNS sold 21 units of AI servers, with a target to sell 300 units in FY25.

The research house maintained a “buy” call on SNS with a target price of 54 sen based on FY25 price-earnings multiple of 15 times, in line with industry peers.

The research house anticipates the support and resistance level of the share price to be at 33 sen and 43 sen, respectively.

“We expect the company’s FY24 to FY27 earnings to grow at a robust compound annual growth rate of 39%.

“In addition, SNS maintains a solid balance sheet, with a gearing ratio of 13 times as of 4Q24,” the research house said.

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