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Announcements

ADMISSION TO AIM

CSF Group, a leading provider of data centre facilities and services in South East Asia today announces its admission to AIM, following the successful placing of 50,909,091 new Ordinary Shares at a price of 55 pence per share to raise gross proceeds of £28 million for the Group.

The new Ordinary Shares represent approximately 31.8 per cent. of the issued share capital of the Group upon Admission. Cenkos Securities plc is the nominated adviser and broker to the Group.

HIGHLIGHTS

  • Established 1991 - involved in the build & fit out of over 200 data centres
  • Largest provider of data centre services in Malaysia with 35% market share
  • Customer base comprising global blue chip IT, telco and industrial companies
  • Currently runs the largest high-end data centre in South East Asia, at 157,000 sq.ft.
  • Placing raises funds to build CX5, a new 201,000 sq.ft data centre in Cyberjaya
  • Expanding into Thailand and Vietnam - both emerging markets
  • Expects to achieve over 80% occupancy in all its data centres by end 2010
  • Placing over-subscribed

Adrian Yong, Chief Executive of CSF Group, commented, “This milestone event has been the culmination of many years’ hard work, enterprise and successful endeavour. For the Directors and employees of CSF the listing on AIM brings new opportunities as we look to expand our geographic footprint while providing better technology and services to our customers.

“The data centre market in South East Asia is going through a phase of growth due to the increase of data-intensive businesses and, as one of the longest established and most respected service providers in the region, CSF will use the impetus of its Admission to take the maximum advantage of this unique situation.”

For further information:

CSF Group +603 8318 1313
Adrian Yong, Chief Executive

Leander (Financial PR) +44 (0)7795 0168 157
Christian Taylor-Wilkinson

Cenkos Securities PLC (Nominated Adviser and Broker) +44 (0)20 7397 8900
Ian Soanes or Elizabeth Bowman

KEY INFORMATION

GROUP HISTORY

CSF has a leading position in the Malaysian data centre industry where it offers a range of highly flexible, scalable, data centre services to domestic Malaysian, South East Asian and large international businesses. Its primary focus is the design, development and operation of data centres in Malaysia and it has acquired minority interests in entities in Vietnam and Thailand to help to facilitate its planned expansion into these countries. The Group receives income from tenants of its data centres. The Group also develops data centres on behalf of third party customers.

The Group has three operating subsidiaries, Atlas CSF, CSF Advisers and CSF CX. The Group is headquartered in Cyberjaya, Malaysia approximately 50km from central Kuala Lumpur at an office adjacent to the CX2 data centre.

Data centres are buildings that house networking and computing equipment such as servers, routers and fibre optic transmission gear, allowing businesses that own this equipment to connect and interact with each other and the internet. The Group provides its clients with high specification data centre space incorporating power (including back-up power), cooling and fire suppression infrastructure and related services including security services. Data centres are typically of critical importance to the operation of clients’ businesses and equipment security and continuous operations are vital. This service level is achieved through the provision of highly stable, secure buildings and the use of sophisticated uninterruptible power supplies, cooling systems and monitoring systems.

The Group’s expertise in developing data centres for its own use derives from its long-established record of developing enterprise data centre facilities for customers such as the Malaysian Stock Exchange. Since 1991, via its subsidiary Atlas CSF, the Group has been involved with the build and fit-out of over 200 data centres and computer support facilities in Malaysia for clients including government-linked organisations, financial institutions and telecommunications companies. Not only does Atlas CSF provide the Group with expertise in data centre construction but it also provides it with advantages in terms of the cost and speed of development.

In 2003, the Group completed the development and build of its own high specification commercial data centre, CX1, in Cyberjaya, Malaysia. Cyberjaya is a dedicated technology park located close to the capital city, Kuala Lumpur, which has been developed by the Malaysian government as the heart of the country’s “Multimedia Super Corridor”. In January 2009, the Group completed the development of a much larger data centre, known as CX2, which is also located in Cyberjaya and, the Directors believe CX2 is currently the largest high-end commercial data centre in South East Asia. It is currently 60 per cent. tenanted and the Directors anticipate that the space will be fully tenanted by the end of calendar year 2010.

The Group usually leases space to its customers for a three year initial term with renewal options, and, to date, the Group has achieved a 90 per cent. renewal rate. The primary tenant of the CX data centres is TM Net, the Malaysian Government’s telecommunications provider, which represents a significant proportion of Group revenue and profit. This anchor tenant was one of the initial tenants in CX1 and the Group now has a number of large multinational and Malaysian customers including one of the world’s largest technology and computer companies.

The Group generates a growing income stream from the rental of data centre facilities and from maintenance services provided to its tenants and its enterprise data centre customers. CSF also generates profits from the development of its own facilities and receives fees for the development and fit-out of enterprise data centres for customers.

The Group will continue to focus on the growth of its data centre portfolio, growing its recurring rental and maintenance revenue streams. The Malaysian economy continues to grow strongly and the Directors consider that this underlying growth, coupled with increased internet penetration and the growth in South East Asia of more data-intensive businesses, presents the Group with considerable opportunity. In addition to domestic demand, the Directors consider that Malaysia provides an attractive base for international companies to locate regional data centre operations.

The Placing will provide capital to enable the Group to accelerate its development of data centres to add to its portfolio and the Directors believe that admission to an international stock market will support the Group’s plans for expansion in Malaysia and into neighbouring countries in South East Asia.

The Group has 127 full time employees.

DATA CENTRES

The Group currently operates the CX1, CX2 and CX3 data centres. The key specifications of these buildings as well as the proposed CX5 facility are set out below.

 

CX1

CX2

CX3

CX5

Opening Date

 

May 2003

Jan 2009

Jan 2009

Sept 2011

Location

Cyberjaya

Cyberjaya

Menara MSC

Cyberjaya

Floor Area (net sq. ft.)

45,000

157,500

2,000

201,000

Power Density

900KW

5MW

200kW

16MW

Occupancy

95%

53.7%

85%

n/a

COMPETITIVE STRENGTHS

  • Experienced and capable management team – The management team of the Group includes members who have been involved in the ICT industry for over 30 years with extensive experience in providing the full range of data centre-related services and solutions ranging from design to operation. The experience gained from years of servicing large organisations including multinational corporations has also provided the management team with in-depth knowledge of the industry and the technical expertise and know-how necessary for troubleshooting common problems associated with data centres and computer rooms. The management team has also established a good business relationship with a network of building contractors and equipment suppliers within Malaysia.
  • Comprehensive solutions and services – The Group is able to provide a full range of data centre-related services and solutions including review, design and development, fit-out, operations and maintenance.
  • Proven track record – The Group has extensive experience having already been involved in fitting-out more than 200 computer rooms and data centres. The Group is also engaged in providing ongoing data centre tenancy solutions to leading international companies and thrives on the experience gained from meeting the stringent quality control measures imposed by these clients.
  • Ability to meet international standards – Whilst Malaysian law imposes relatively few statutory standards in relation to the design, development, operation and maintenance of data centres in Malaysia, the Group seeks to differentiate itself by reference to the quality and high specification of its offering. To this end, the Group seeks wherever possible to voluntarily adhere to relevant international standards.
  • First-mover advantage operating a high-end, carrier neutral, outsourced data centre – The Directors believe that the Group is considered to be a leader in the wholesale data centre market in Malaysia offering high-quality, carrier neutral, outsourced data centres. The Directors believe that the quality, experience and recognition that the Group has gained from the development and operation of its data centres make it attractive to potential clients.
  • Cost management – The Directors believe that the experience gained from developing over 200 computer rooms and data centres for clients and developing and operating two high-end commercial data centres of its 12 own, combined with the skills that Atlas CSF brings to the Group, mean that the Group is able to develop and operate data centres at lower costs than companies that are seeking to develop their own in-house facilities.
  • Diverse blue chip client base with high degree of recurring revenues – The provision of data centre space and ongoing management provides recurring revenues. There has been little churn in this area of the Group’s business. The Board attributes this to the relatively high costs involved in moving specialist equipment, the limited high specification data centre space available currently in Malaysia and the degree of satisfaction enjoyed by its tenants with the service they receive. The Group’s current customer base is anchored by TM Net, the Malaysian Government’s telecoms provider and other clients include large multinational corporations. The Directors believe that the Group is a market leader in the provision and management of data centre space and that this can be demonstrated by the blue chip nature of the Group’s customer base.
  • High barriers to entry – Data centre specifications are increasing rapidly and as data centre specifications increase, it becomes increasingly important to coordinate the various aspects of data centre design and development in order to control cost and energy consumption. The Directors believe that the Group possesses the necessary expertise and experience to develop cost and energy efficient data centres. The trend towards larger, better specified, more expensive facilities limits the number of developers who have the credentials to attract the finance required to develop such facilities.
  • Scalability of the operations – One of the Group’s strategies is to develop data centres at locations with adequate surrounding land area to make allowance for future expansion in terms of either extending the existing data centres facilities or building new data centre facilities within the vicinity as demand grows.

COMPETITION

There are a number of companies providing data centre related services and solutions in Malaysia and the amount of net data centre space that these competitors own and/or operate ranges from approximately 2,000 sq. ft. to approximately 120,000 sq. ft. and the main services offered are co-location, web-hosting, managed services and disaster recovery.

The Group is the market leader in Malaysia with 35 per cent. of outsourced data centre space (Source: Broadgroup) and the Group is seeking to grow its market share.

Although CSF does face some competition in the Malaysian market for the provision of data centre space, the Directors believe that the Group is able to differentiate itself from its competitors in terms of the quality and capacity of the data centre facilities that it owns and operates. The Directors believe that the Group’s data centres are typically larger, newer and better specified than those of other data centre providers.

STRATEGY AND USE OF PROCEEDS

The Directors are striving to position the Group as a market leader in the design and development of high specification data centres in South East Asia. The Directors view Malaysia as a regional hub for technology companies in South East Asia with Cyberjaya offering numerous benefits to corporate locating there, including excellent internal and regional telecommunications links as well as a reliable power supply.

The Group intends to focus on growing its recurring revenue streams from the leasing and operation of data centre space as well as maintenance services. The CX buildings have, to date, proved attractive to large Malaysian and international companies and this type of customer will remain key to the Group. CSF intends to build upon its position as a leader in the South East Asian Market.

A significant portion of the proceeds of the Placing will be used to finance the development of its next data centre, CX5, a new 201,000 net sq. ft. facility in Cyberjaya. CX5 will set a new standard for technical specification and power density and is expected to meet the standards of the most demanding international customers.

The Group plans to expand its data centre portfolio in Malaysia and neighbouring countries. A smaller portion of the proceeds will be spent on expansion into Thailand and Vietnam, with the remaining proceeds to be used for general working capital purposes.

CURRENT TRADING

In the interim period to 30 September 2009 the Group recorded a profit after tax of RM3.5 million and as at 30 September 2009 net assets were RM9.9 million.

The Group’s current order book stands at RM185 million of which a large proportion relates to the development of the CX5 project which is in the final planning stages. On a three month rolling average basis the monthly run rate based on the period ended 31 December 2009 for rental and maintenance contract revenue is RM3.6 million.

Since 30 September 2009 the Group successfully completed the sale and leaseback of the CX2 data centre. This resulted in an unaudited profit on sale of RM38 million, a reduction in property, plant and equipment of RM143 million, and cash proceeds for the Group of RM181 million of which RM96 million was used to repay bank borrowings. Furthermore, on 25 November 2009, CSF CX declared and paid a dividend of RM29 million to shareholders in that company.

The Group expects to continue to be profitable and cash generative and intends to declare and pay interim and final dividends to shareholders annually according to its financial performance.

DIRECTORS

At Admission the Board of the Company comprises three executive directors and three independent nonexecutive directors whose details are as follows:

Yong, Kwet On (Adrian), aged 53, Chief Executive Officer
Mr Yong has been involved in the ICT industry for 30 years with broad sales and management experience. Prior to joining the Group in 1997, he held leadership positions in several MNCs involved in the ICT business. Before joining the Group, he was the Chief Executive Officer of PKTech International Ltd where he was instrumental in its listing on the SESDAQ market of the Singapore Stock Exchange. Mr Yong spearheads the Group’s strategic and business expansion efforts on the local and regional fronts. Mr Yong holds a Bachelor of Arts (Economics) from the University of Windsor, Canada.

Wong, Chow Ming, aged 42, Chief Operations Officer
Mr Wong has over 17 years of experience in the ICT industry, with strong domain skills and experience in network and communications infrastructure. He was previously the country sales manager for one of the world’s largest communications and network systems providers. He has been responsible for marketing the CX business and executing technical requirements, overseeing the expansion of the Group into the targeted regional markets. Mr Wong is a graduate in Computer Science from the Texas Technology University, Lubbock, Texas, USA.

Lee, King Loon, aged 38, Chief Financial Officer
Lee King Loon has over 16 years of experience in accounting, financial and corporate matters and holds a Bachelor of Commerce from the University of Western Australia and is a full member of CPA Australia and the Malaysian Institute of Accountants. He also holds a Capital Markets Services Licence issued by the Securities Commission of Malaysia to provide advice on corporate finance. Prior to joining the Group he was a partner at Crowe Horwath.

Ting, Heng Peng (Dato’ Ting) aged 49, Non-executive Chairman
Dato’ Ting has over 20 years of legal practice experience in corporate matters and civil and commercial litigation. Presently, he sits on the board of two companies listed on the Kuala Lumpur Stock Exchange. Dato’ Ting holds a Bachelor of Commerce (Hons) from the University of Windsor, Canada and a Bachelor of Laws (Hons) from the University of Essex, United Kingdom. He is also admitted as a Barrister-at-Law at Lincoln’s Inn, London.

Dennis Kian Jing Ow, aged 43, Non-executive Director
Mr Ow is currently an executive director of Paq International Holdings Limited, an AIM quoted company. He was formerly deputy CEO of LED International Holdings Limited which is also AIM quoted. He has prior experience with capital markets advisory roles within the London Stock Exchange, Old Park Lane Capital Asia and Blue Oar and has been involved in bringing eight companies from South East Asia to AIM and two to the Official List of the London Stock Exchange. Mr Ow was educated and raised in Australia and gained an undergraduate degree in marketing and a postgraduate degree in management.

Phil Cartmell, aged 58, Non-executive Director
Mr Cartmell was formerly Chief Executive of Vega Group PLC between 2001 and 2008. He holds a number of other directorships including Trafficmaster PLC and Corac Group plc. He has extensive experience as a director of AIM companies.

The Company intends to appoint a further non-executive director based in the United Kingdom shortly after Admission.

LOCK IN AGREEMENTS

The Directors and certain senior managers, collectively interested in an aggregate of 80,842,782 Ordinary Shares, representing 50.53 per cent. of the Enlarged Share Capital, have entered into lock-in agreements with Cenkos and the Company.

DEFINITIONS

Terms used in this announcement have the meaning attributed to them in the Company’s Admission Document.