Another Singaporean data centre + construction play, aiming to grow in SE Asia

Relatively undiscovered co trading at 10 p/e

Tai Sin Electric is a leading Singaporean manufacturer of electric cables. It benefits from Singapore’s construction boom and leverages its reputation and dominance in Singapore to break into other markets in SE Asia, notably in Malaysia and Vietnam.

The company is not well covered and is starting to be discovered by Singaporean investors, who will likely be interested in its (unofficial) 50% dividend payout policy. It is holding its AGM in October, where I expect management to tell its shareholders what we already suspect - the company is continuing to do very well. I will cover the AGM in a paid post.

Data centres and construction in Singapore

TS rode Singapore’s data centre boom between 2018 to 2022, supplying 70% of Singapore’s data centres.

Apart from DCs, it supplies many of the pillars of Singapore’s economy and will benefit from the five-year boom Singapore is experiencing. Because cables lag the start of projects, I estimate that the Singapore cable revenues will peak around 2027, benefitting from projects like Changi Terminal 5, the Marina Bay Sands extension, new MRT lines, and the relentless construction of public housing.

Data centres in Johor and Vietnam

Meanwhile, as Singapore won’t support more DCs, the market has simply moved up north to Johor, where TS has a manufacturing facility and a well-established presence. They have already started to see data centre revenue from Malaysia but given the 100% growth in Johor data centres and the aforementioned lag, I think this only shows up in the numbers in the next year or so.

Finally, TS also has a manufacturing facility in Vietnam in close proximity to emerging data centre clusters in HCM and Binh Duong. It is well positioned to capture some of the DC spend here but that remains to be seen.

The DC market is nice because it is higher margin than other projects. I understand public infrastructure in Singapore is the lowest margin.

Diworsification?

TS does not want to be known as merely a cable manufacturer. It has an Electrical Material Distribution business, which is lower margin than its Testing & Inspection business, both roughly equal contributors to earnings. In short, they distribute electrical products (which will benefit from DCs) and test construction materials, primarily in Indonesia.

I believe the market is not really giving TS much credit for its ability to grow these businesses. However, there is a nice tailwind of DC projects in Johor and O&G projects in Indonesia.

They are acquiring two distributors of solar power equipment in Thailand and the Philippines from Baywa Re. I’m not particularly excited about this but will find out more at the AGM.

TS trades at around 10 PE, which is a discount to peers. The CEO was a buyer at 40 cents a share.

Like XMH, the market thinks this is fairly priced now. However, I think there is potential to surprise and I am looking forward to attending the AGM.