Backed by Sun Hung Kai, the profitable Hong Kong AIDC leader, covered for the first time, giving “Buy” rating companies that have been deeply involved in the IDC industry in Hong Kong, China for 25 years and have the number one Internet service in Asia. The majority shareholder Sun Hung Kai Properties is one of the largest real estate developers in Hong Kong. Backed by Sun Hung Kai Properties, the company has various advantages such as land, electricity, financing, and engineering. Based on IDC square footage, the company's share of the IDC market in Hong Kong, China was about 33% in the first half of 2024. By the end of 2024, the company had operated eight data centers with an operating IT power capacity of 103 MW and a utilization rate of 88%. In the fiscal year 2020-2024, the company's revenue increased from HK$1.719 billion to HK$2.68 billion, net profit after deduction from HK$0.783 billion to HK$0.907 billion, EBITDA margin remained around 70%, and gross margin related to data centers remained above 52%.
We expect the company's FY2025-2027 net profit to be 1.131, 1.42, and 2.008 billion yuan, respectively. When not included in the convertible bond share capital, the PE corresponding to the current closing price is 14.3, 11.4, and 8.0 times, respectively, and the corresponding EV/EBTIDA is 14.1, 11.9, and 9.3 times, respectively; after including the convertible bond share capital, the PE corresponding to the current closing price is 24.6, 19.6, and 13.9 times, respectively, and the corresponding EV/EBTIDA is 19.1, 16.0, and 12.5, respectively Double, covered for the first time, giving a “buy” rating.
In the era of high-density AI, the company entered a new cycle of capacity expansion. The company successively completed two large-scale data centers, MEGA Gateway and MEGA IDC (Phase 1), in 2023-2024, to begin a new cycle of production capacity investment. MEGA IDC provides a total floor area of approximately 1.2 million square feet for the Group's flagship new land project in Tseung Kwan O, and is designed to support up to 180MW of electricity capacity. The first phase of MEGA IDC has now been put into use, providing about 50 MW of electricity capacity. After the project is completed, the total floor area of the company's data center in Hong Kong will reach nearly 3 million square feet, and the power capacity will increase to more than 280 MW. At the same time, some of the company's IDCs still have room for potential power expansion.
It has a unique internet network, many leading cloud customers have settled in, and companies with high rent and EBITDA own and operate a submarine cable landing station (HKIS-1), and another submarine cable landing station (HKIS-2) is under construction. The company's MEGA-i data center is the number one interconnection center in Asia, connecting 9 submarine cable systems from around the world, and has about 15,000 optical fiber interconnect network cables. The company has raised the standard price of optical fiber internet cable by about 10% since March 2024, while the number of optical fiber interconnect network lines has continued to grow; the company's customers include customers from leading cloud vendors such as Amazon AWS, Alibaba, and Tencent; as of the second half of 2024, the average monthly rent of a single cabinet in the company's IDC computer room is about HK$2,500 per month, and the average monthly EBITDA for a single cabinet It reached approximately HKD/KW/month, which is far higher than other international companies in the same industry.
Risk warning: AI and cloud development falls short of expectations, industry competition intensifies, digital economic growth falls short of expectations
