In this note, we provide you with our thesis on Wasion. We begin by explaining why DayOne plans on expanding globally so quickly. Thereafter, we explain how Wasion will likely rapidly benefit from DayOne’s expansion.

DayOne Expansion

DayOne is the Chinese datacentre developer GDS’ international subsidiary. The subsidiary builds datacentres for ByteDance and Oracle around the world. As a result of the Trump Administration’s export restrictions on NVIDIA’s latest chips to China, Chinese hyperscalers are incentivised to build datacentres internationally with the latest generation chips before renting the compute power. Since the latest NVIDIA chips like Blackwell and Rubin are more energy efficient and cheaper to run, Chinese hyperscalers can rent cheaper compute power overseas than if they were to build domestically.

This arbitrage has allowed Oracle and DayOne to develop datacentres globally on behalf of ByteDance. One of the largest clusters under development is in Johor, Malaysia. The following satellite imagery provided by SemiAnalysis shows this development:

SemiAnalysis Imagery of Oracle / ByteDance Cluster in Malaysia

SemiAnalysis also notes that, while Oracle is currently DayOne’s only large western customer, there is a second one coming soon. One of DayOne’s advantages is that, using Chinese modular solutions, it can build a datacentre from zero to 100MW of full operation in less than 12 months.

GDS is only really planning on expanding internationally. For the time being, there is a surplus of compute compacity within China and utilisation rates are relatively low. GDS’ international subsidiary however is ramping. Excluding 3rd party datacentres, the following chart shows a step change in the company’s total IT power committed for future developments:

SemiAnalysis notes that ByteDance plans a stellar capacity ramp in ASEAN, Europe and Latin America. Just recently the company signed a partnership agreement to build a hyperscale campus in Lahti, Finland with a total capacity of 128MW. SemiAnalysis notes that they expect GDS to “continue to grow extremely fast, with >1GW of total committed power likely within a year, and half of it operational.”

The first point to note is that DayOne is set to expand at an increasing pace globally as a result of (i) its relationship with ByteDance and Oracle and (ii) attracting another major Western customer.

How will Wasion Benefit?

Traditionally, Wasion’s business has been in the business of making smart metering and energy measurement devices. These devices make electric grids in China more resilient and efficient, helping to direct power to where it’s needed and plan for infrastructure expansion. This business, we’d estimate, will continue to grow at a rate of around 15% y/y over the medium term.

Historically, Wasion has been a small player in providing electrical equipment to Chinese datacentres. Prior to AI, Chinese datacentre development expanded at unremarkable rates. The company, however, has had a relationship with GDS in China for the last 6 years. Wasion provides datacentres with electrical measurement equipment, electrical distribution equipment, transformers and switchgear. After working on some projects with GDS in Shanghai, DayOne chose Wasion to be one of two of its global suppliers (the other supplier is Delta Electronics). In April 2025, Wasion’s subsidiary, Weyong, signed a strategic co-operation agreement with DayOne.

In order to meet the demand from DayOne, Wasion built a new factory in Johor, Malaysia and it opened in April 2025. Wasion provides DayOne with design capability as well as one-stop services and equipment provision. Given its manufacturing capacity in Malaysia and Mexico, Wasion provides customers with one-stop customised solutions for transformers, medium and low-voltage switchgear, energy storage uninterruptible power systems (UPS) and related products. The company is also focused on developing power distribution technology, high-voltage DC power supply, liquid cooling solutions (given its technology in heat dissipation) and prefabricated modular power distribution products.

The question that begs to be asked is why has DayOne decided to choose Wasion, a small Hong Kong power and flow measurement business, as one of two global suppliers?

There are two reasons. The first is its product quality reputation when it did work GDS in Shanghai, a partnership that has spanned more than 6 years so far. The second reason is because of its partnership with Siemens. From what we can tell, Wasion is the only company in Asia to have a partnership with Siemens in energy device production and cooling technologies. This partnership started in 2014 after Siemens was impressed by the quality of Wasion’s products. This partnership allows Wasion to sell Siemens’ products as part of its service offerings in Asia, allowing it to access Siemens’ latest technologies. Additionally, for hard-to-get components, Wasion goes to the top of the order queue given its long-standing partnership with Siemens.

A third benefit is the ability to partner with Siemens to develop new datacentre products. On the 19th of February 2025, Wasion Energy entered into a strategic co-operation agreement to “collaborate to promote comprehensive solutions for modular datacentres.” The aim of the partnership is to “jointly develop modular datacentre solutions, covering from underlying architecture design to energy management optimisation. This aim is to achieve rapid deployment and efficient operations while significantly reducing delivery time. Additionally, both parties will integrate global customer resources to provide end-to-end services, ranging from planning and construction to operation and maintenance.” Pretty comprehensive.

Quantification of Revenue Torque from New Partnership with DayOne

As part of our investment process, we like to understand and be able to quantify the impact of a change on a company’s future revenues and earnings power. The greater conviction we have in the forecast, the greater the conviction we have in the inference we’re making.

In this particular case, the impact of this new partnership with DayOne on Wasion’s earnings power is significant. In the second half of this year, Wasion’s management estimates that it has received orders from DayOne in Malaysia of a value of RMB1.3b. When annualised, this represents around 30% of the company’s revenues. The datacentre business will grow from practically nothing to 30% of the company’s revenues in the next 12 months (because DayOne typically builds its modular designs within a year).

In terms of its impact on the net income, the datacentre business likely runs at the a gross margin of around 25-30%. This compares to its existing business’ gross profit margins of around 40%. While the margin is lower, the growth is much faster. Combined with the traditional business’ 15% top-line growth, we expect Wasion to begin to grow earnings by 50%+ in 2026.

Currently, as a rule of thumb 100MW of DayOne construction leads to about RMB500m in revenues for Wasion. As we’ve seen in the chart from GDS above, DayOne is planning an expansion of more than 500MW in the next year alone. The rate of change in DayOne’s development is significant, with power acquisition growing 5x faster than the average of the prior 4 quarters.

There are more realistic growth opportunities that would add to this rule of thumb. Management notes that they currently provide only a small portion of the total products used in the datacentre. Further product development, both alone and in partnership with Siemens, could substantially increase this run rate. For example, if the testing of their liquid cooling solutions passes qualification, then they may generate RMB1b of revenues for every 100MW of datacentre development. From the earnings transcript, while the translation is a bit patchy, it would appear the company has already secured some initial orders for liquid cooling.

Another growth driver is DayOne’s international expansion beyond Malaysia. It’s important to stress that Wasion’s partnership with DayOne isn’t just limited to Malaysia. On the most recent half-year earnings call, management noted that “so in the future in…countries from South-east Asia to North America to Europe, we are working in depth with DayOne.” This provides more growth potential that is currently not in management’s forecast for orders. While they are currently harvesting work in Malaysia, they have begun to provide parts in the United States (from their Mexico factory that is not subject to tariffs) and are planning on fulfilling orders to Finland. Japan and Thailand also have significant potential.

It is becoming clear to us that the company has a multi-year ramp of growth. As a supplier, being partnered with a rapidly expanding leader in the industry can be extremely lucrative and transformational. We’ve seen this many times before, including with TSS Inc and Dell, Foxconn and Apple, Solaris and X.ai etc. We believe that the partnership between DayOne and Wasion will be equally rewarding for shareholders.

Valuation and Risk-Reward

What should one expect to pay for this types of earnings growth and earnings power transformation?

We’d fathom that it’d be more than 10x earnings. At around HKD10 per share, the company trades around 10-11x 2025 earnings. If we’re right about earnings growing 50% next year, then this would be a price-earnings multiple of around 7x 2026 earnings. And yet, this is where the stock currently trades. And while investors have begun to notice the change in the business given the more recent price surge, we believe we are far from recognising the company’s true value.

Mainland Chinese datacentre stocks routinely trade around 30-60x 2025 earnings. For example, transformer and switchgear maker Hainan Jinpan trades around 35x 2025 earnings and, from what we understand, doesn’t have a datacentre contract of the most lucrative kind. SMIC’s HK listing trades at a PE multiple of around 70x 2025 earnings. Internationally, Wasion’s partner Siemens AG trades around 24x 2025 earnings and Vertiv trades around 32x 2025 earnings. If the company were to be valued around half of what international peers at a price-earnings multiple of around 30x 2025 earnings, then the upside would be triple today’s share price.

We struggle to see why the company should trade down below HK$9 per share. As such a purchase at around HK$10 per share would provide a realistic risk-reward ratio of about 20:1.

There are other reasons why we like the stock:

Management is aligned with shareholders with the Chairman owning around 60% of the company’s stock.
The company owns around 60% of Willfar Information, which more or less equates to its own market capitalisation.
The company pays out 50% of its earnings as dividends so that if one is right on its long-term earnings power, then they will enjoy a substantial return from free cash flow realisation.

All-in-all, we believe that the risk-reward from an investment into Wasion is compelling. In our view, the conviction into the inference of earnings growth from its new partnership with DayOne is well-founded. Wasion’s long-standing partnership with Siemens, who struggles to expand manufacturing capacity, provides it with a competitive advantage. Outside of some macro factor like a reignition of the US-China trade war, Wasion is an excellent candidate for a major re-rating.

Unpacking Uncertainty

Wasion - One of Two AI Datacentre Suppliers…