Malaysia tipped to lead regional data centre race
Hong Leong Investment Bank (HLIB) said the DC investment narrative remains "firmly in place", driven by Malaysia's ample land availability, cost competitiveness and faster deployment compared with regional peers like Indonesia, the Philippines and Vietnam.
"Malaysia is no longer just a spillover market from Singapore. It is the go-to destination for hyperscalers," HLIB said in a thematic note following its 19th Bursa Malaysia-HLIB Stratum Focus Series.
Citing Tenaga Nasional Bhd's 6.4 gigawatt DC pipeline and projected construction and engineering costs of RM30 million to RM40 million per megawatt, HLIB estimated the pipeline could generate RM120 billion to RM180 billion worth of contract value.
"This is four to six times larger than the total contract awards tracked during the light rail transit rollout years, and two to three times more than the peak of mass rapid transit-related disbursements in 2016," it said.
In the first quarter of 2025 alone, Malaysia approved RM90 billion in investments. Of that, RM35 billion, or 93 per cent of the information and communications subsector, was related to data centres.
HLIB said most DC operators are sitting on ample undeveloped landbanks, enough to support phased build-outs over the next one to two years. This points to a market entering a consolidation phase, not a slowdown in construction activity.
To support the anticipated surge, HLIB expects a sharper focus on power and water infrastructure upgrades, especially as next-generation DCs adopt artificial intelligence and quantum computing workloads.
"These newer workloads require four times more power and specialised cooling systems. Hence, a timely infrastructure rollout will be critical," it said.
Among the companies expected to benefit from the boom are IJM Corp Bhd, MN Holdings Bhd and Master Tec Group Bhd.
IJM, which has submitted several DC tenders this year, is seen as a "prime laggard-play" in the construction sector. The company currently has three ongoing DC projects in Johor and has made inroads with international players seeking to expand hyperscale infrastructure in Malaysia.
MN Holdings stands to gain from Tenaga's planned rollout of 500 kilovolt (kV) substations in Johor's DC hotspots. The company's RM1.1 billion order book is made up of about 90 per cent substation engineering work.
It is also seeing strong demand for high-voltage transmission jobs, especially in the 275kV segment, which offers better margins.
Meanwhile, Master Tec, a cable manufacturer, is expanding into the production and trading of higher-voltage cables to meet growing demand from DC projects and Tenaga's transmission infrastructure.
The company recently added new medium-voltage capacity and is targeting entry into the 33kV and 275kV segments to strengthen its position in Malaysia's power infrastructure market.
HLIB also identified Tenaga Nasional Bhd, YTL Power International Bhd, Solarvest Holdings Bhd, Southern Cable Group Bhd, SMRT Holdings Bhd, Gamuda Bhd and Telekom Malaysia Bhd as key DC beneficiaries under its coverage.
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