CSF Group

BUY

19/01/2011 Ben Jaglom

Malaysian data centre provider CSF Group (CSFG) produced a strong set of results for the six months to September.

Founded in 1991 the AIM-quoted concern, which raised £28m in a float last March at 55p, has reported pre-tax profits of RM 32.5m (£6.7m) on sales of RM39.5 (£8.1m). Revenue from data centre revenue was up by 18.9% to RM19.7m, also reporting a cash position of £24.9m.

CSF operates over 200 data centres in Malaysia and South-East Asia and is headquartered in Cyberjaya, Malaysia. It is the largest provider of data centre services in the country with customers including various blue-chip companies, and TM Net, the state-owned internet service provider in Malaysia.

CEO Adrian Yong, a graduate of the University of Windsor in Canada, told Growth Company Investor that he has some ambitious plans for CSF. The company has already started construction of a data centre entitled CX5, which upon completion, expected sometime in 2013 will make it the largest data centre in the nation.

Yong enthuses that Malaysia is an excellent place to do business, as enterprises operating in its ‘Multimedia Super Corridor’ zone do not have to pay any tax for ten years.

Looking forward, Yong suggests growth will come organically, expanding further into Vietnam, Thailand and South-East Asia and increasing its market share.

For the year to March 2011 analysts at Cenkos forecast pre-tax profits of £10m on a turnover of £28.1m, with a forecast dividend of 1.7p offering a yield of 2.2% on the current price, with the shares trading at 14.5 times 2011 earnings of 5.3p.

Data centres are certainly not the most exciting of investments, but the need for the buildings that house a wide variety of equipment such as servers and routers continues to be strong. Much of South-East Asia is undergoing a rapid rate of growth as countries such as Malaysia and Vietnam power ahead, overlooked by many commentators who primarily focus on the ascent of China.

Offering a respectable yield, some ambitious growth prospects and a significant pile of cash, we think the shares in CSF represent a strong and relatively secure investment.