Data center operators from the Asia-Pacific region are receiving billions of dollars worth of investment from global investors looking to capitalize on the artificial intelligence boom.
Although surging demand has led to higher valuations, the region has led the world in data center deals this year, and experts say its value will only increase given the nascent nature of the industry and its growth prospects.
The valuation benchmark for the industry was set in September, when a consortium led by Blackstone agreed to acquire Australian data center group AirTrunk, with an implied enterprise value of more than A$24 billion ($15.58 billion), or more than 20 times target forward core earnings.
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The deal propelled the Asia-Pacific region to the top of this year’s mergers and acquisitions (M&A) rankings in the global data center market. LSEG data showed that the transaction value totaled US$17.03 billion, accounting for more than half of the global transaction value.
The industry’s high valuations in Asia are partly linked to data center operators adding capacity as countries and companies respond to booming demand for artificial intelligence.
For example, the process of selling a minority stake in Indonesian data center NeutraDC has attracted interest from the likes of Singtel and BDx Data Centers, two sources with direct knowledge of the matter said.
About 20% to 30% of Indonesian state-owned communications company Telkom’s data center unit was put up for sale in October, sources said, and the business could be valued at more than $1 billion.
Niko Margaronis, analyst at brokerage BRI Danareksa Sekuritas said Neutral DC Its valuation could exceed core earnings by more than 20 times due to factors such as the adoption of a capacity expansion plan to increase capacity from about 60 MW at the end of 2024 to 500 MW by 2028 to 2030.
The nascent nature of business in the region is also driving valuations.
“If someone gives you a contract for 1 gigawatt, you could double your capacity or more,” said Projesh Banerjea, director at investment firm KKR.
Last year, KKR acquired a 20% stake in Singtel’s Asia Data Center for S$1.1 billion (approximately US$818.64 million), and in June partnered with Singtel to invest S$1.75 billion in ST Telemedia’s global data center. The profit multiple for the deal was not disclosed.
Manjit Balgir, head of Asia telecoms and digital infrastructure at Bank of America, said: “Valuations for data center assets reflect the rapid growth the industry is currently experiencing, driven by large orders from hyperscale customers.”
IPO scale expands
In another example, Australia’s HMC Capital said on November 21 that strong investor interest prompted the company to expand the IPO size of its data center business DigiCo REIT by A$100 million to A$2.75 billion.
The listing is Australia’s largest this year, according to DigiCo’s IPO prospectus, which is scheduled to debut on the local exchange on December 12 and is valued at 26 times expected earnings.
The new valuation benchmark for data center deals compares to the average market multiple for core earnings in broader private infrastructure deals globally (about 16 times), according to asset intelligence and data firm Realfin.
Insufficient infrastructure
However, some investors say the sustainability of valuation premiums in the coming years will be tested by market execution risks from insufficient power capacity and infrastructure.
Gilles Chow, managing director and head of North Asia real estate at CPP Investments, said the reliability of physical data center delivery will become even more important to tenants.
Charlie Wilson, Asia head of M&A and private equity at Sidley Austin, said: “Ultimately, we believe the Asia-Pacific data center market will remain positive in the medium term, but expect growth in the sector may cool slightly as capacity comes online.” explain.
- Vishakha Saxena Additional Editor, Reuters
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