CSF riding high after AIM admission
6th April 2010, Aishah Mustapha, firstname.lastname@example.org, The Edge (Malaysia)
While Adrian Yong, the CEO of CSF Group, prefers to fly under the radar, the local data centre player may have left his peers in the dust. He is already doubling the company’s total data centre capacity after its successful listing on London’s Alternative Investment Market (AIM), which raised £28 million (RM137 million).Yong says CSF’s next building, called CX5, will have 201,000 sq ft of nett lettable area, adding to its existing total area of 205,000 sq ft at three buildings – CX1, CX2 and CX3.CX1, with a nett lettable area of 45,000 sq ft, is 95% occupied while the occupancy rate of CX2 (157,500 sq ft) is 54% and CX3 (2,000 sq ft) is 85%.
According to a Broadcom report, CSF commands around 35% of the Malaysian market. This could change with the addition to the family of CX5 – a RM 400 million project that will occupy 10 acres of land in Cyberjaya and be jointly owned by CSF, a property developer and the landowner. Yong declined to name the parties involved. If all goes according to plan, CX5 will be completed by November this year. Avid gardener Yong says CX5 will be rated by the Green Building Index for its environmentally friendly design and green efforts. “I’m just doing my bit for the environment,” he comments. The proceeds from CSF’s listing will go towards financing the development of CX5. Yong also plans to extend the company’s reach in the region with the opening of a 3,500 sq ft data centre in Vietnam this May. The Vietnam operations come under a joint venture with Hanel Communications, a subsidiary of 26-year-old Hanel Electronics. “Our modus operandi, when we go into other countries, is to work with local partners that can bring synergy to the group. We are looking at utilities, telcos, ISPs or people who have been doing data centre infrastructure and services,” says Yong. CSF, which listed on March 22 this year, issued around 50 million shares amounting to a 31.8% stake in the company at 55 pence per share. Its listing was also seen as a boost for AIM – which had been sluggish since the global financial crisis – from the technology sector. When asked why he decided to raise capital on the UK market, Yong says it is because this region does not fully understand the data centre business. “In this part of the world, there is no purely data centre company that is listed. So investors do not have a reference. If you go to UK, you have Telecity or Equinix to refer to. These are trading at reasonably good PERs (price-to-earnings ratios) of 16 to 18 times, which is good encouragement for us to be there,” he explains. At the moment, CSF is in a comfortable position, having completed the sale and leaseback of two of its building to a local fund management company. The sale of CX2 last year resulted in an unaudited profit of RM38 million, a reduction in property, plant and equipment of RM143 million and cash proceeds of RM181 million, of which RM96 million was used to repay bank loans. The sale and leaseback of CX1 was completed recently, with profit expected to be around RM20 million. “This model can work in the long run for us. Our clients are long term and there is growing demand for our services. Also, I don’t have to worry about a massive bank loan over my head,” says Yong.Speaking about growing demand, Yong observes that the landscape has changed a lot since setting up CX1 in 2003. “Six years ago, you saw very little commercial data centre space. Most of them were disaster recovery centres. The Malaysian market has grown from almost zero square feet to more than 400,000 sq ft today. There is growth, but it could be better. A line that I use all the time is: Singapore has 18 times more data centre space per capita than Malaysia. We have plenty of room to grow.” Yong feels that Malaysia has most of the ingredients needed for a successful data centre industry. He knows, for example, that there is a lot of internal demand, judging from the client he sees. “The next requirement is utilities, communications and space. It’s not just the cost of electricity, land or network, but also quality, for example network speed and the availability of power. Let’s say I want to open a data centre in a new area tomorrow. I might need to draw extra power from the grid. That takes time. So, we may have a good pool of people and resources here, but availability and quality are important as well,” says Yong. CSF’s plans for the future include looking at new locations such as Iskandar Malaysia in Johor, Jakarta and Bangkok. “I’d like to have a minimum of two data centres per country in this region [Asean]. Of course, we will build wherever there is demand [for data centres],” says Yong. CSF, which was founded in 1991, also provides services for the development and fit-out of enterprise data centres and boasts clients that are blue chips. Its financial results for 2009 have not been released but for the interim period ended Sept 30, 2009, CSF registered a profit after tax of RM3.5 million. However, the sale and leaseback transactions of CX1 and CX2 were not included in this figure, says Yong. It is obvious that CSF has a number of good things going for it this year. Seeing that Yong loves to collect warrior figurines – from Japanese samurai to American cowboys – he certainly seems set to win the battle of turning CSF into the leading data centre player in ASEAN.