KUALA LUMPUR (June 7): Shares in Mah Sing Group Bhd (KL:MAHSING) hit an all-time high on Friday morning, one week after the property developer announced its proposal to establish a joint venture (JV) to develop a data centre in Bangi, Selangor.
The stock climbed to RM1.90, the highest since its listing in 2006. It pared some gains to settle at RM1.84 at the noon market break, still up nine sen or 5.1% from the previous close, after 38.85 million shares changed hands — higher than the 20-day average trading volume of 24.07 million shares.
According to Bloomberg, 11 out of 12 analysts who cover the stock have a 'buy' call on Mah Sing, while the outlier has issued a 'sell' rating. The average 12-month target price stood at RM1.89.
"The next event to watch out for is whether there will be off-takers for the data centres, and the potential replication of such data centres in other industrial parks," TA Securities analyst Wendy Thiam Chiann Wen told The Edge. "The rally will be sustainable if these materialise."
However, she flagged that intense competition within the data centre sector could lead to pricing pressure and reduced margins.
To recap, Sime Darby Property Bhd (KL:SIMEPROP) is set to build and lease out a hyperscale data centre at its Elmina Business Park in Shah Alam in a deal worth RM2 billion. Meanwhile, YTL Power International Bhd (KL:YTLPOWR) is partnering up with Nvidia Corp to build an artificial intelligence (AI) infrastructure in Johor.
Mah Sing became the latest to jump on the data centre bandwagon. Last week, the group announced a JV with Bridge Data Centres Malaysia V Sdn Bhd (BDC) to develop a data centre, which would consume up to 100 megawatts (MW) on a 17.55-acre (7.1-hectare) land in Bangi.
The shareholding structure of the JV has yet to be finalised.
According to TA Securities, with a monthly rent per kilowatt of US$110 (RM516.22), the data centre could generate approximately RM620 million in annual revenue.
"Assuming a net margin of 20%, Mah Sing's 20% stake in the JV could yield a profit share of RM23.6 million. This amount corresponds to roughly 11% of its core earnings for the financial year ended Dec 31, 2023 (FY2023)," the research house said.
It added that the target commencement of operations is within 12 to 18 months, subject to BDC securing customers.
'There is no bubble'
Rakuten Trade head of equity sales Vincent Lau expects further trading opportunities for Mah Sing shares, saying the bullish momentum of AI-driven counters should be sustainable over the next two years.
“Unlike the dot-com bubble, the AI wave is backed by earnings, as proven by tech giants such as Nvidia. There is no bubble,” Lau told The Edge. “The construction and utility sectors have seen their counters rallied, but the technology-related counters remain a laggard.”
The dot-com bubble saw technology stocks on the US market climbing exponentially in the late 1990s, fuelled by fad-based investments, before bursting in the early 2000s, as the companies failed to turn a profit.