In a statement, Public Investment Bank Bhd (PIVB) said Telekom Malaysia Bhd (TM) is seen as the prime beneficiary in the telco space, and the thirst for more energy should lead to an unprecedented surge in TNB’s power demand.

“We estimate that its partnership with Singtel to establish a greenfield data centre in Iskandar Puteri could potentially result in an earnings uplift of about 24% beyond the financial year 2026 (FY2026).

“Hence, a higher tariff would be justifiable to capture adequate return on investment,” it said.

PIVB noted that TNB is expected to roll out about RM90 billion in capex for six years until 2030 to support energy transition initiatives and system upgrades.

It also said more infrastructure development, such as power connectivity, internet exchange points, cable landing stations, and fibre optic cables, is expected to cater to the expanding information technology (IT) workloads.

“Currently, the total IT load in Malaysia is estimated at 900 megawatts (MW) in 2024, but this is expected to balloon to about 1,400MW by 2029, translating to a compound annual growth rate (CAGR) of 8%,” it said.

PIVB raised the target price (TP) for TNB to RM16 from RM13 previously with an “outperform” call.

The investment bank said other beneficiaries from the increased data centre investments in Malaysia include construction sector players such as Gamuda Bhd (TP: RM9.20) and IJM Corporation Bhd (TP: RM4.20) for their track record in securing more data centre jobs.

“Their next-generation industrial building system would help shorten construction period as the speed of deployment is crucial to these data centre operators,” it said.

PIVB added that key risks to its recommendation includes competition from regional data centres, power and water scarcity, and an oversupply condition in the domestic market.

Additionally, it said there are concerns about environmental impact due to overconsumption of natural resources, as well as heat and wastewater generation.