Saturday 20 Jul 2024
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KUALA LUMPUR (Jan 29): Telekom Malaysia Bhd (TM) is said to be exploring plans to build a new hyperscale data centre (HDC) in Malaysia, expanding its capacity from the existing Klang Valley Data Centre (KVDC) and Iskandar Puteri Data Centre (IPDC), according to CIMB Investment Bank. 

HDCs are large facilities offering at least 40 Megawatts (MW) of IT power capacity and often bigger, catering to large cloud service providers and internet companies, according to the research house.

Leveraging its extensive submarine and terrestrial networks, as well as strong local relationships, CIMB sees that TM may be able to attract strong strategic international partners to co-invest in such an HDC.  

"Besides helping to partly fund the investment required, a strong strategic international partner could also share expertise in the design and operation of DCs that cater to hyperscalers and AI workloads," CIMB said in a note on Monday. 

"This could include the implementation of more efficient cooling solutions such as direct-to-chip liquid or immersive cooling, as well as advanced real-time server monitoring platforms, to ensure seamless management of expensive graphics-processing unit clusters to prevent overheating," it added.  

Furthermore, CIMB posited that the strategic partners could also help secure tenants for the new HDC, by offering space for expansion to their existing DC tenants. 

If TM proceeds, CIMB expects the group to develop the HDC in phases. "If kicked off in 2H2024, the first phase could be ready for service by 1H2026."

While there will be little boost to earnings in the financial year 2024 and 2025 due to the timing of project completion, CIMB believes investors "could get more excited about TM over the potential value creation from a more aggressive expansion of its DC business".

"We value TM’s DC business at a net present value of RM2.53 billion (66 sen per share)," it added. 

As such, CIMB has raised its target price on TM to RM6.85 and maintained its "buy" call on the counter.

At Monday's market close, TM's shares were up three sen or 0.51% at RM5.96, giving the group a market capitalisation of RM22.87 billion. Year to date, the counter has grown by 6.43%, or 36 sen, from RM5.60 at the start of the year. 

Edited ByIsabelle Francis
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