I just wrapped up day 1 of Tech Week in Singapore. Behind the paywall is my theory on how XMH will expand its capacity, a catalyst that may imminently be announced to the market. This theory is founded on meetings with various Mitsubishi sales reps and engineers, as well as a conversation with a Mitsubishi partner.
To recap, XMH Holdings (BQF.SI) is a company that emerged from obscurity into a notable data centre supplier generating about S$50m in sales to the fast growing data centre hub in Johor, north of Singapore.
In simple terms, XMH puts together a diesel back-up generator with its various systems into a container, that is essentially a very big battery for a data centre. If you are unfamiliar with this, I encourage you to google what containerization involves.
I am told that container costs the end customer in the region of USD 900k. The key part of the container is the diesel generator manufactured by Mitsubishi:
Mitsubishi now owns 15% of the XMH subsidiary that does the work of designing, putting the container together, and testing, known as the Projects division in XMH. As I explained in an earlier post, this stake is a good thing, indicating Mitsubishi’s commitment to the relationship.
My assessment from the AGM is that the XMH free float is tightly held by a small group of patient shareholders who are waiting for a price of >$2 a share. I agree with them that XMH is viewed as a marine engine distributor, principally in Indonesia, and that proper acknowledgment of XMH’s status as a Singaporean version of PSIX (Power Solutions International) will command a higher PE.
I walk through everything I learned about XMH at the trade show below. This includes clarifying the competitive landscape in Johor, a catalyst that may materialize by the end of the month, my discussions with various quality engineers, and an assessment of the sentiment around the longevity of Johor’s data centre growth.
This is a fairly speculative play. While I am reasonably confident the catalyst will materialize soon, price action in Singapore is unpredictable, particularly since financial news is not well covered or understood. Perhaps one day this newsletter will be a meaningful contributor to the Singapore news ecosystem, but that day is not this day. Please do your own due diligence and make decisions appropriate for your circumstances, as this is not financial advice