Sime Darby Property in RM2bil data centre venture

The property company announced its build-and-lease partnership with a technology-based multinational company Raiden APAC Pte Ltd to develop a hyperscale data centre at the Elmina Business Park in Sungai Buloh, Selangor.

KUALA LUMPUR: Sime Darby Property Bhd (SDP) is making its foray into the data centre business in a RM2bil deal.

The property company announced yesterday its build-and-lease partnership with a technology-based multinational company Raiden APAC Pte Ltd to develop a hyperscale data centre at the Elmina Business Park in Sungai Buloh, Selangor.

The signed partnership is with Pearl Computing Malaysia Sdn Bhd, which is a unit of Raiden APAC.

The data centre will be located on a 49-acre site within SDP’s 1,500-acre Elmina Business Park.

The project is set to break ground in the second quarter of 2024, with construction targeted for completion in 2026, SDP said.

After construction is completed, both parties will enter into a 20-year lease valued at up to RM2bil, with options to renew for two additional five-year terms, it added.

According to SDP, the group and its flagship Elmina Business Park were chosen based on strategic merits, including the group’s 50-year track record in large-scale integrated projects, the park’s robust infrastructure and prime location, as well as the group’s financial strength, which assures long-term lease certainty.

“We are excited to embark on our maiden entry into the data centre segment, which is rapidly emerging as an important asset class within real estate for which we are well-positioned to expand into.

“This project allows us to broaden our income base, which aligns with our strategy to grow recurring income,” SDP group managing director Datuk Azmir Merican said in a statement.

SDP said its role is to manage the design and development, infrastructure planning as well as construction management and will ensure a successful delivery of the facility, which is customised to the client’s specifications.

“This facility will elevate the Elmina Business Park’s status as a premier industrial location for technology corporations, both local and international.

“This achievement reflects the effort invested in its realisation.

“We would also like to acknowledge local municipal authorities, government agencies and utility providers who have supported us, as their contributions have been instrumental in advancing this project, which is of national significance,” he added.

At a press conference yesterday, Azmir said the decision to go into the data centre business would be for the long term.

“Just like any other business operator, we have to look at who we work with, as these are long-term partnerships. We have to be confident that we will have enough infrastructure to cater for the demand,” he said.

Meanwhile, Azmir said SDP should be able to sustain its strong first-quarter results ended March 31, 2024 (1Q24).

SDP’s net profit more than doubled to RM123.6mil in 1Q24 from RM60.7mil a year ago, translating into an earnings per share of 1.8 sen from 0.9 sen previously.

Revenue for the quarter jumped 42.8% to a record-high of RM978.7mil since the 2017 demerger versus RM685.3mil last year.

“This is our best quarter since the demerger from the group. The first-quarter results are also an important marker for how we will do for the rest of the year. The market is also in a good position.

“Among the reasons why we have done well in this quarter is because we have the right product mix, which allows us to defend our margins. We also had good site progress, which is tied to having the labour shortage issue largely resolved.

“Good site progress allows us to increase our billings. And good teamwork to ensure issues and problems are kept to a minimum,” Azmir added.

SDP’s shares rose to close at its six-year high of RM1.16 in yesterday’s trade, giving it a market capitalisation of RM7.89bil.

The counter had added nine sen from the previous day and has had a close to 90% gains in share price in the year-to-date period.

Commenting on the impending fuel subsidy rationalisation, Azmir said it is unlikely at this juncture that any rise in petrol or diesel pump prices will impact its subcontractors.

“Nonetheless, we are awaiting further details and we have to see clearly what is being planned. Once there is clarity, then we can gauge how big this will be in the property sector.

“This is why for us, our product mix is important – to have a higher mix to which we can maintain margins since we also realise costs will rise over time,” Azmir said.

SDP is also confident that the high-rise segment of the property market in good locations will do well as the property market makes a comeback.

“Our products such as the one in KLGCC – we know it is prime land for condominiums and serviced apartments. The ones launched at Ara Damansara have seen very healthy and good take-up rates. Just as we are known for our landed, we also want to be good in the high-rise segment.

“As a whole, we are launching more high-rise developments because we feel we have (land parcels) in the right location in mature townships, so we can push for this,” he added.

Meanwhile, for its operations in the United Kingdom, chief financial officer Betty Lau said it was presently operating in a “challenging environment” there due to the high interest costs.

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