- Supply growth to further slow down to 9.1% p.a. in 2021-2024E
- Demand will remain resilient after the pandemic; cloud services to predominate
- Expect supply shortage in the next few years
- Reiterate BUY on SUNeVision (1686 HK) as a key beneficiary of supply shortage
Supply growth to further slow down to 9.1% in 2021-2024E. The COVID-19 resurgence in Hong Kong has led to longer data centre approval processes from the government, and delays in data centre construction and logistics issues. Based on our research, along with conversations with the Data Centre Facility Unit, we now expect supply growth to further slow down to a CAGR of 9.1% in 2021-2024E (vs. our previous forecast of 12.3%).
Resilient demand post-pandemic. The market is concerned about slower data centre demand due to rationalisation post pandemic and geo-political tension, as well as shrinking spending from internet companies. However, we expect the demand to be resilient for digitalisation after the pandemic. Besides, Hong Kong is still an attractive data centre hub in APAC region despite the geo-political tension. We also expect Hong Kong to catch the demand for overseas expansion from Chinese internet companies and cloud providers amid slower domestic growth due to macro uncertainties. According to Gartner, total end-user spending on public cloud services in Hong Kong is expected to grow at a CAGR of 26% in 2021-2024E. We forecast overall data centre demand to grow by 15%-20% p.a. in 2022-2024.
Expect supply shortage; reiterate BUY on SUNeVision. Looking forward, we expect a supply shortage for data centres in Hong Kong in 2022-2024, given the limited supply and resilient demand growth. SUNeVision will be a key beneficiary as the largest data centre operator in Hong Kong with a market share of 16% in terms of GFA and 100%+ IT capacity expansion with three new projects to be delivered in the near term. Reiterate BUY on SUNeVision with a TP of HK$13.3.