Sizzling valuations are no bar for Asia data centre deals as AI growth beckons

Global investors are queueing up to invest in data centre operators in Asia Pacific either by buying stakes directly or via public offerings, unfazed by their rich valuations that are driven by demand for artificial intelligence-based services.

Many industry executives say the regional data centres will continue to command high valuations due to the nascent nature of the industry and its growth outlook. Some, though, say a lack of robust infrastructure could cast a cloud on their outlook.

Data centres house computer servers and equipment that companies use to process and store data.

A valuation benchmark for the sector was set in September when a consortium led by alternative asset manager Blackstone agreed to buy Australian data centre group AirTrunk for an implied enterprise value of over A$24 billion ($15.58 billion), or over 20 times the target’s forward core earnings.

The process to sell a minority stake in Indonesian data centre NeutraDC, for example, has attracted interest from Singapore Telecommunications (Singtel) and BDx Data Centers, among others, two sources with direct knowledge of the matter said.

A sale of roughly 20% to 30% stake in the data centre arm of Indonesian state-owned communication company Telkom, which kicked off in October, could value the business at more than $1 billion, sources have said.

Brokerage BRI Danareksa Sekuritas’ analyst Niko Margaronis said NeutraDC could be valued at more than 20 times core earnings helped by factors including a capacity expansion plan to reach 500 megawatt by 2028 to 2030, from around 60 MW by end-2024.

Telkom group spokesperson Ahmad Reza told Reuters the sale process is “underway and progressing well”. He declined to comment on details including valuations, stake sale size and parties interested.

BDx, an Asia Pacific data centre operator backed by U.S.-headquartered I Square Capital, declined to comment. Singtel did not respond to requests seeking comment

In another example, Australia’s HMC Capital said on Nov. 21 that strong interest from investors had led the company to upsize the IPO of its data centres business DigiCo REIT by A$100 million to A$2.75 billion.

The listing, Australia’s largest this year and scheduled to debut on the local bourse on Dec. 12, translates into a valuation of 26 times forward earnings, according to DigiCo’s IPO prospectus.

The new valuation benchmark for data centre deals compares with average market-wide multiple of around 16 times core earnings in the broader private infrastructure deals globally, according to asset intelligence and data company Realfin.

“Valuations of data centre assets are reflective of the rapid growth currently being experienced by the sector, driven by large orders from hyperscale customers,” said Manjit Balgir, Bank of America’s Asia telecom and digital infrastructure head.