Powering the Digital Revolution

With total installed capacity of 83MW (~32% market share), DCI Indonesia Tbk (DCII), the leading data center provider in the country, is poised to ride the growth in major global tech expansions with projected domestic capacity increase at CAGR of 30% in 2023-27F. Its competitive edge, of being the first and only Tier-IV data center in ASEAN, has allowed DCII to book solid financial growth, achieving revenue CAGR of 28.3% from 2018-23 with 2023 EBITDA margin exceeding 60% and EPS growth of 40%, outperforming global competitors like Equinix and Digital Realty. However, quality does come at a price given annualized 2024 P/E of 162.7x and EV/EBITDA of 102.1x.

Market leader with ~32% share. DCII, with current 83MW capacity (32% market share) up from 7MW (10% share) in 2018, has established itself as the leading player in Indonesia's data center industry and solidified its dominance by launching Southeast Asia’s first AI-equipped, Tier-IV data center, E1, in Jakarta. Having already spent IDR 288 billion in 1H24 of its full-year capex budget, the company is developing another data center, JK6 with potential capacity of up to 36MW, to commence operations in 1H25. Upon completion, the JK6 data center will increase DCII’s total capacity by +43% to over 100MW.

Beneficiary of Indonesia’s tripling in data center capacity to 1,000MW+ by 2027. Indonesia's data center industry is poised for substantial growth as the global economy increasingly embraces data and AI-driven operations. 2018-22 CAGR for data center capacity was 30%, and in 2023 alone, the growth exceeded 39% to 316MW. Given its low vacancy rates, Indonesia is also well-positioned to benefit from spillover demand from Singapore. Major tech giants (hyperscalers) such as Google, Microsoft and AWS, which are heavily focused on cloud and AI services, will be key growth drivers. We project Indonesia's data center capacity to more than triple, from 316MW to over 1,000MW, reflecting  2023-27F CAGR of over 35%.

Strong financial performance: 2018-23 EPS CAGR of 42.3%. Led by CEO Toto Sugiri, DCII's expertise in data centers has fueled strong financial growth, achieving revenue CAGR of 28.3% from 2018-23 and EBITDA margin exceeding 60% in 2023, outperforming global competitors like Equinix and Digital Realty. On the bottom line, the company reported robust EPS growth of 40.7% in 2022 and 39.9% in 2023. Looking ahead, the company over the longer run plans further expansion by building a new, renewable-powered complex in Bintan. Our recent visit to DCII suggest that the company is well-managed with plenty of growth opportunities ahead on rising data usage in Indonesia. However, in terms of valuation, the stock trades at a premium with annualized 2024 P/E of 181.8x and EV/EBITDA of 108.5x.