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Not abandonment! President of Dr. Peng clears up doubts on the transfer of data center assets

2020-04-29

At a time when data centers are becoming hotter with the initiative of "new infrastructure", Dr. Peng's plan to transfer its data center assets for 2.3 billion yuan has attracted market attention. On April 28, the president of Dr. Peng Cui Hang, who was investigating the location of the data center project in Shenzhen, said in an interview with the reporter that the move was not "forgetting the original intention", but to occupy a favorable position in the "new infrastructure" data center construction wave based on the company's actual conditions. “The asset disposal is nothing but an adjustment of the company's data center layout, aiming to optimize the asset structure and to get more advantageous resources of data center by self-construction, co-construction and light assets operation mode of HOMM on the other hand.”


“Transfer” does not mean the abandonment of self-construction

When interviewed by reporters, Mr. Cui was choosing a site and making reserves for the data center in Shenzhen. He told reporters that in the past month, he has traveled to Huizhou, Zhuhai, Dongguan, Kunshan, Nanjing, Nantong, Changshu, Langfang to make site reserves in the Guangdong-Hong Kong-Macao Greater Bay Area and the surrounding areas of Shanghai and Beijing, These places have become the key points for the data center layout of major manufacturers.

On the evening of April 27, Dr. Peng announced that it planned to transfer its data center assets for 2.3 billion yuan to Pingsheng International Financial Holding Co., Ltd. and Jinquan Yuanhe Investment Management Co., Ltd. After the deal closes, Dr. Peng will continue to operate and manage the data center business related to the underlying assets and enter into a direct service agreement with customers, with the business revenue shared between the parties.

As for the transfer of data center assets, Mr. Cui first explained to reporters that "transfer is not abandonment". According to him, many policies introduced for the "new infrastructure" are actually a mixed blessing for Dr. Peng.

"The benefit is that in the seven major areas and related industries defined for the new infrastructure, Dr. Peng's business covers more than half, including 5G base station maintenance, data centers, industrial Internet and artificial intelligence; however, the worry is that when the capital swarms into the data center construction, the proliferation of data centers with poor operation may bring problems such as price wars that are not conducive to the development of the industry and ultimately affect the market order.” Mr. Cui admitted that as the company has accumulated 20 years of experience in data center operations and has compliance qualifications such as IDC and telecommunications value-added service licenses, he does not want to miss the industry opportunities, but also needs to consider the requirement of heavy assets in data center construction and the issues such as debt repayment and private enterprises' financing costs faced by the company.


Self-construction, co-construction and HOMM

According to the announcement, as of December 31, 2019, the book value of the underlying assets of the transaction was 880 million yuan, but the transfer price was 2.3 billion yuan. The company's net profit in 2020 is expected to increase by about 950 million yuan after taxes and fees. In addition to the one-time gains, represented by the new cooperation model reached in this transaction, “co-construction” will be one of the primary business models of Dr. Peng's data center.

Mr. Cui said that in the future, the self-construction, co-construction and HOMM (Hotel Operations Management Model) of the future Dr. Peng data center will be "combined” with focus on large data centers in the Beijing-Tianjin-Hebei region, the Yangtze River Delta and the Greater Bay Area, to achieve comprehensive transformation to the “asset light and operations" model transformed into a "light assets and operation serious" model. In the next three years, the number of operational cabinets is expected to reach 120,000. His investigation over the past month is just in preparation for this purpose.

HOMM is also a focus besides co-construction. In December 2019, Nanjing Kaideyou Cloud Data Center jointly funded by Dr. Peng and Canatal started construction, with a total investment of 1.5 billion yuan and a total capacity of 8400 cabinets. It is the first sample of Dr. Peng's big data HOMM. Prior to the cooperation, precision air conditioning systems and chillers produced by Canatal were widely used in data center computer rooms. Canatal is an upstream enterprise for Dr. Peng. Mr. Cui explained that Canatal has the advantages over land and capital, and Dr. Peng has operational experience and customer base. With complementary advantages. Dr. Peng gains the operating income from asset light operation through "empowerment" such as agent construction, maintenance, operation and sales, while Canatal can enter the data center business downstream of the industrial chain.

For this innovative operation model, some insiders admit that as many servers will last 10 or even 20 years, big customers of the data center value the service ability very much when they choose the service target. Those who are just "amusing themselves as amateurs" and lack of national network layout service providers are often not considered. Customers expect more stable cooperative relationship, which is also the reason why many listed data center companies focus on pushing “customized data center”. However, although such customization mode enjoys customer and cost advantages, it is highly dependent on customers with no “say“ in cabinet launch speed and profit. The two models have their own advantages and disadvantages, but they both have high threshold.

Nanjing Kaideyou Cloud Data Center of Dr. Peng has been under construction for less than half a year by now, and its follow-up operation efficiency remains to be seen. However, Mr. Cui said the model has attracted the attention of large state-owned enterprises and financial institutions and more cooperation is under negotiation.

Reporters noted that in this data center asset transfer, the Agreement on Entrusted Operation of Data Center Business reached by both parties of the transaction has a term of up to 10 years, and it is agreed that Dr. Peng has the priority to renew the agreement upon expiration. “For the data center industry, since the capital market has already provided a model of ‘one fish for more’, we should take advantage of it.” Mr. Cui said that the big data of Dr. Peng will cooperate with digital real estate operators intending to develop data center business in project equity, capital, construction, operation and maintenance, and marketing, to seek development on the premise of ensuring survival.



Source: Shanghai Securities News