MAHSING: Property Developer Sustains Strong Outlook Despite Data Centre Deal Lapses

A leading property developer recently announced the lapse of its second collaboration agreement for a significant data centre development, following an earlier termination of a similar partnership. Despite these setbacks in its digital infrastructure ambitions, investment bank TA Securities has reaffirmed its “Buy” recommendation, noting that the events have no impact on its target price or earnings projections for the company.

Reasons for Collaboration Lapse

The termination of the agreements with Bridge Data Centres (BDC) for the 35.68-acre Southville City site, earmarked for a 200MW data centre, and an earlier 17.55-acre parcel, was attributed to broader sector-wide challenges. These include rising electricity tariffs, proposed US curbs on AI chip exports to Southeast Asia, and escalating geopolitical uncertainties, which have prompted hyperscale operators to re-evaluate investment risks and cost profiles in Malaysia.

Robust Core Property Business

Crucially, TA Securities highlighted that it had prudently excluded the data centre component from its valuation and forecasts following the lapse of the first agreement in May. This foresight means the recent developments do not alter its positive outlook. The company’s core property development business remains robust and on track, demonstrated by strong demand for affordable homes. Recent launches, such as M Legasi and M Grand Minori, achieved a 90% take-up rate.

The developer has already secured RM1.15 billion in sales in the first half of FY25, representing 43% of its full-year target, alongside approximately RM400 million in bookings. With an additional RM1.85 billion worth of launches planned for the second half of FY25, the group is well-positioned to achieve its full-year sales target of at least RM2.65 billion.

Strategic Path Forward and Outlook

Moving forward, the company is actively engaged in discussions with interested parties to explore various options for the Southville City site, including joint ventures, build-to-lease arrangements, or outright land sales. An outright land sale is considered a more viable route for quicker value realization and lower execution risk. Management aims to secure a deal by year-end, with negotiations reportedly progressing. The group remains committed to pursuing its data centre initiative, leveraging the site’s strategic location in Bangi, Selangor, its excellent connectivity, and infrastructure readiness.

TA Securities maintains that the recent share price weakness has already factored in the data centre setback, presenting an attractive entry opportunity. The firm reiterated its ‘Buy’ recommendation with an unchanged target price of RM1.72 per share. The positive outlook is underpinned by solid fundamentals, a prudent landbanking strategy, and consistent sales execution, providing a strong foundation for sustained earnings visibility.