Citic Telecom to unveil 2 major data centres by end-2014

It will also add 2400 racks.

According to DBS Group Research, Citic Telecom data segment grew by c.30% in FY13, and is expected to contribute around 10-20% revenue in FY14. Citic Telecom will have two major data centres in Hong Kong by end of FY14: Citic Telecom Tower (CTT) (at Kwai Chung) and Ap Lei Chau (ALC) data centre.

Here’s more from DBS:

It will gradually terminate data centres in IFC, Citic Tower and Quarry Bay, and move the operations to CTT this year (to be launched in 2Q14).

CTT will have around 70,000 sq. ft. raised floor area and 1,700 racks; ALC will have 40,000 sq. ft. raised floor area and 700 racks by end of FY14.

Rental rate is about HK$4,000 per rack per month (not including other value added services and electricity, etc).

The company plans to add 6500+ racks in the next 1-2 years (2000+, 1500+ and 3000+ racks in HK, Macau and China, respectively). Total investment is estimated to be HK$1.5bn.

Management expects upside on dividends from HK10cents per share in FY13 (or HK$332m). We are forecasting HK$710m earnings for FY14, offering 3.9% yield at the current share price. Maintain BUY with a TP of HK$3.20, pegged to 15x FY14F PE. Key catalysts also include strong data center growth and asset injections.