Water tariff hike to boost construction sector, says CIMB
The revised water tariff structures help ensure the financial sustainability of the water operators, with additional revenue streams being channelled to upgrade and refurbish water infrastructure systems such as water treatment plants (WTPs) and replacing old pipes.
The firm is upbeat about a structural shift in water demand from special economic corridors and industrial zones, including the Johor-Singapore Special Economic Zone (JS-SEZ).
"This is bolstered by the rising proliferation of data centre (DC) campuses and other upcoming industrial facilities in Johor," it said in a note.
Downstream, CIMB Securities envisage spillover opportunities for contractors and pipe players if Suruhanjaya Perkhidmatan Air Negara's (SPAN) call for the DC industry to transition towards alternative water resources (e.g., treated effluent from sewage plants) is adopted.
The firm said this entails the mapping out of waste treatment plants that can be connected with the new DCs.
"Other water resource development projects that have been mooted to sustainably enhance raw water supply include the construction of off-river storage facilities or barges, rainwater harvesting, and using reclaimed water to power the DCs' cooling systems," it said.
Meanwhile, CIMB Securities said it is equally optimistic about the potential implementation of alternative funding schemes involving the private sector.
It believes this is an approach that could reduce the government's financial burden as it strives to facilitate substantial investments required by the country's Water Sector Transformation Plan 2040 (AIR 2040).
"Through a competitive bidding process, private sector companies can play an active role alongside the government to resolve major water infrastructure issues plaguing the water sector, such as non-revenue water (NRW) loss," it said.
Overall, CIMB Securities has maintained Gamuda Bhd as its preferred play for water-related infrastructure construction.
The firm expects the Penang-Perak water transfer project to take off in 2026, providing RM4 billion worth of job prospects plus other potential opportunities such as renewable energy initiatives.
"Having bagged the main contract to build Phase 1 of the Rasau Water Supply Scheme WTP, Gamuda is also gunning for similar types of work worth around RM300 million in Selangor," it added.
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