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Regal Orion bites on data centres with Heitech Padu

OVER the past few months, Heitech Padu Bhd and private company Regal Orion Sdn Bhd have inked some deals relating to the development of data centres. Regal Orion has also taken up a 10% stake in Heitech Padu.

Regal Orion chairman and owner Ryuichi Shimokawa (pic) says he approached to take up the stake in Heitech Padu following their joint venture signed in March this year, for the development of a tier-4 data centre in Shah Alam.

HeiTech Padu operates a data centre in Shah Alam and owns another 2.71 acres there, part of which will be used for the new data centre.

Shimokawa says that Regal Orion will be responsible for the construction and financing of the data centre in Jelutong, with Heitech Padu as the landowner.

He estimates that the construction could cost about RM320mil.

In a filing with Bursa Malaysia in March, Heitech Padu said the construction of the first phase of the data centre is expected only in September 2024.

Under the agreement, Heitech Padu will grant Regal Orient the right to develop the data centre on the land, in exchange for a 20% cut of the profit of the project.

“Subject to the project being profitable, a 20% profit after tax attributable to Heitech Padu shall only be reported in the financial year Dec 31, 2024, ” it said.

“The agreement is in line with Heitech Padu’s overall corporate strategy to gain new business from both existing and new markets.”

Following the partnership announcement, Heitech Padu proposed a private placement of 10 million new shares or 10% of the total number of issued shares to Regal Orion at an indicative issue price of RM1.26 per share or RM12.6mil in total.

The proceeds from the share sale would be used as working capital.

As a strategic shareholder in Heitech Padu, Regal Orion has the potential of unlocking new customer segments, access to market, technology and expertise, especially in data centre-related business activities.

Shimokawa says Regal Orion will not be adding on to its stake in Heitech Padu after this. Regal Orion first emerged last November after it signed a memorandum of understanding with Heitech Padu to form a partnership related to the data centre business.

Regal Orion is also building a data centre in Techpark@Enstek in Labu, Negri Sembilan, of which Shimokawa, a Japanese national, acquired in 2018 for about RM66mil.

However, the Covid-19 pandemic has affected the development of the data centre and its completion date has been postponed to Jan 1, 2023.

“Due to the logistic inconvenience caused by the pandemic, it has resulted in a 12-month delay in our Labu project.

“We have finalised the design for the data centre and are in the midst of fine-tuning detailed terms and conditions with the main turnkey contractor, ” Shimokawa says.

Shimokawa says that Heitech Padu’s existing data centre, combined with his Labu data centre, could achieve operational efficiencies.

Both data centres are expected to have 30MW capacity each, with tier-four standards.

Earlier, Shimokawa said that for a data centre to achieve a tier-four standard, it would need backup power to ensure there is no outage.

For the data centre in Labu, he said he has invested another RM35mil to build a gas power plant to support the upcoming operation.

With consumers and businesses consuming more data hastened by the Covid-19 pandemic and 5G technology, data centres are in demand.

The data centre market in South-East Asia is poised to grow by US$10.57bil (RM44.26bil) between 2019 and 2023, according to market research company Technavio in its March 2020 report.

However, data centres require high capital expenditure for the cost of the servers and infrastructure, especially on the high-speed connectivity and cooling systems.

Several local companies are also planning to set up data centres, with G3 Global Bhd being the latest. Last year, G3 Global said it is planning to build the country’s largest data centre with a capacity of 100MW in Bukit Jalil.

The largest data centre owner in Malaysia is Telekom Malaysia Bhd via TM One, which has 12 data centres with a total data centre space of more than 180, 000 sq ft, followed by players like Bridge Data Centres, NTT Malaysia, Strateq, AIMS (Time dotCom) and Keppel Corp.

Time dotCom has started to build a 50MW data centre in Cyberjaya via its subsidiary AIMS Data Centre.

Heitech Padu has been reporting profits over the past two financial years. The group was in the red in financial year 2017 (FY17) and FY18. For FY20, the company posted a 48% rise in net profit to RM10.96mil from RM7.43mil a year earlier.

https://www.thestar.com.my/business/business-news/2021/07/10/regal-orion-bites-on-data-centres-with-heitech-padu

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