Telcos, developers set to gain from data centre boom — CIMB, KAF

KUALA LUMPUR (Jan 26): Data centres (DCs) with an estimated IT power capacity of 827 megawatts (MW) are expected to come online from 2023 to 2026,  resulting in a quadrupling of DC capacity in the market, benefitting telecommunication operators, construction companies and property developers, according to CIMB Investment Bank and KAF Equities Sdn Bhd.

In a joint research note, the two houses said the capacity is expected to increase from around 200-250MW at the end of 2023 to over 1GW by the end of 2026, thanks to the initiatives by operators to expand capacities, particularly in Johor and Cyberjaya.

Several Malaysian companies, including Telekom Malaysia Bhd (“Buy”, TP: RM6.20) , Time dotcom (“Buy”, TP: RM5.85) and YTL Power, are set to benefit from their development plans for DCs in the two regions.

The firms in a note on Friday highlighted that YTL Power is in the early stage of developing its Green DC Park, which will initially provide 48MW of the total 500MW planned over the next decade, while Telekom Malaysia is constructing the second block of its Klang Valley Data Centre (KVDC) and Iskandar Puteri Data Centre (IPDC), adding around 18-20MW of IT power capacity.

Meanwhile, Time dotCom, which has a stake in the AIMS Group, is set to build the second block (8MW) of its Cyberjaya DC by January 2024, with an additional 15-20MW to be achieved in upcoming years.

Elsewhere, Sunway Construction secured construction jobs from Yondr Group worth RM1.7 billion and K2 worth RM193 million.

Gamuda, with its Industrialised Building System (IBS) plant in Klang Valley, won a contract from AIMS while IJM, another company with an IBS facility in Klang Valley, is reportedly in negotiations for a DC construction job.

Crescendo Corp sold three plots of land in Johor to STT GDC, Yu Ao Sdn Bhd as well as Microsoft for DC projects, while MN Holdings has secured substation engineering jobs from GDS and this year won a contract for high voltage horizontal directional drilling for an unnamed client in Johor.

Meanwhile, Powerwell Holdings bagged a RM16 million contract to supply electrical low voltage switchboards, active harmonic filter and uninterrupted power supply to AirTrunk’s JHB1 DC, said the research firms.

“The Malaysian DC market could go through a short-term digestion phase to absorb all the incoming capacity. However, we believe demand should ultimately be strong over the longer term, underpinned by fast-growing digital economies, continued cloud migration and soon, Artificial Intelligence (AI) developments.

“Besides domestic demand, it is also worthy to note that the new DCs will serve global/China cloud service providers (CSPs) and Internet giants’ expansion in SEA/Asia (with Singapore unable to meet this demand due to supply constraints),” said the research firms.

They also noted that the power needs of the new DCs will be met by agreements signed by Tenaga Nasional Berhad with six operators and MRANTI Corp, with an aim to reduce the usual electricity supply timeframe from 36-48 months to just 12 months.