• Maintain BUY and MYR1.60 TP, 38% upside. UEM Sunrise’s collaboration with LOGOS is another big step into the burgeoning data centre (DC) segment. The plan for a 74-acre DC campus could accommodate a capacity of 360MW. While details on the partnership have yet to be ironed out, we believe it may consider building a portfolio of DC assets for long-term recurring income. UEMS is in a sweet spot to leverage on both Johor’s multi- year growth story and the DC boom, given its strategic exposure in Iskandar Malaysia.

• Partnership with LOGOS. UEMS entered into a MoU with LOGOS Infrastructure Holdco (LOGOS) to exclusively explore the opportunity to develop a DC campus in Gerbang Nusajaya. The proposed 74-acre site (in Precinct 4) could potentially accommodate up to 360MW in capacity. UEMS’ potential role includes providing end-to-end construction management for long-term lease built-to-suit developments, technical works, and dealing with government-related licensing, applications and approvals.

• Potential multi-MYRbn deals from DC players. Although no investment figures were provided, we estimate that this 74-acre and 360MW capacity could bring in DC investments worth MYR10-12bn, and the 74 acres of land alone is worth about MYR260m, based on our conservative MYR80psf assumption. LOGOS specialises in logistics and DC real estate and, in 2022, it appointed a few key personnel to be based in Singapore to support the growth of its green DC business.

• UEMS may be involved to a larger extent this time. Details on the collaboration have yet to be ironed out, but we understand that UEMS may explore the possibility of holding a portfolio of DC assets for a recurring income stream – which could be very sizeable, given the capacity. Although the plan may be limited by its balance sheet, we think the company’s upcoming non-core land monetisation could potentially bring in some financial flexibility that should help in building a DC portfolio.

• Development plans taking shape. With the proper plans in place, including the 40-acre renewable energy industrial park in Precinct 2 and now this 74- acre DC campus in Precinct 4, development plans for the industrial component at Gerbang Nusajaya is slowly taking shape. Interest from global DC players should be strong, and we understand that additional power supply may be added in the area to support the industries and investments.

• Forecast. We make no changes in our earnings forecasts, for now. More details are expected in 4Q24, once the definitive agreement is signed.

Source: RHB Research - 4 Jun 2024