RHB Investment Bank Bhd sees Malaysia as an emerging data centre (DC) hub in Asia, with “accelerated capacity plant-up and hyper scalers making landfall,” coupled with supportive pro-business policies to attract and retain DC investors.
Malaysia’s large pool of knowledge and skilled workers portends a significant competitive advantage in catalysing greater foreign direct investments, which is crucial for the DC space, it added.
“The unity government under Prime Minister Datuk Seri Anwar Ibrahim is committed to further accelerate digital adoption in the country, which augurs well for the domestic DC industry,” the research house said in a note.
It pointed out that the positive outlook of the industry was also supported by the New Investment Policy unveiled by the Ministry of Investment, Trade and Industry (Miti) in October 2022, in which the government looks to boost high value job opportunities.
“Aside from Amazon Web Services and Microsoft, which have committed to set up cloud regions in the country, the likes of global DC names such as GDS, Equinix, and Yondr Group are pouring in significant capital to construct their maiden facilities in the country,” it noted.
“Investment ideas in the DC fold naturally gravitate towards the traditional fixed line telcos, given that DCs were lynchpin assets for enterprise-related services and solutions that complement the vast submarine cable assets owned.
“While there are no pure-play DC companies on Bursa Malaysia, a play on the DC theme should also include construction-related and services-type companies that form part of the broader value chain,” it continued.
The research house highlighted three stocks, namely Telekom Malaysia Bhd (target price: RM6.20, Time dotcom (TP: RM5.60) and Sunway Construction Group Bhd (RM2.07) that are believed to be the core beneficiaries of the DC boom.
As for the Asean region, the research house said demand for hyper-scale DC facilities is being fuelled by strong investments and upgrades to new technologies and the transition to 5G networks.
“Asean has become a major hotspot for DCs, thanks to accelerated digitalisation, accommodative policies, and the lower cost of land and energy, with content and over-the-top providers focusing on the region’s population demographics and appetite for social media,” it noted.
Consequently, it said hyper scalers were compelled to move closer to end-users to reduce latency with the setting up of new cloud regions.
