RHB Investment Bank remains optimistic on Malaysia’s power infrastructure sector, forecasting a multi-year growth cycle driven by expanding electricity transmission spending, surging data centre investments and accelerating renewable energy development.
The research house maintained its “Overweight” rating on the sector, identifying three structural growth drivers that are expected to support earnings over the next three to five years.
These include Tenaga Nasional Bhd’s expanding capital expenditure programme, private-sector investments in data centres, and rising demand for grid infrastructure linked to large-scale solar projects.
RHB expects Tenaga’s continued focus on strengthening Malaysia’s transmission network to generate sustained opportunities for contractors involved in high-voltage power infrastructure.
The bank said investments in transmission assets ranging from 132kV to 500kV would continue to create sizeable contract opportunities as the national utility upgrades the grid to accommodate rising electricity demand.
A growing number of electricity supply agreements (ESAs), coupled with additional main intake substation (PMU) capacity, is also expected to drive stronger demand from data centre developments through 2027 and 2028.
According to RHB, the rapid expansion of data centres is reshaping the industry’s project mix, with increasing demand for higher-voltage infrastructure.
The research house noted that new projects are increasingly concentrated in 132kV and 275kV transmission works, resulting in larger contract sizes and more attractive margins for contractors.
The bank expects the pipeline of high-voltage projects to strengthen further over the second half of 2026 and into 2027, supported by the anticipated rollout of more than five 500kV main intake substations.
Beyond transmission upgrades and data centres, renewable energy development is expected to provide an additional layer of demand for power infrastructure.
RHB said current projects under the Large Scale Solar 5 (LSS5) and LSS5+ programmes should support near-term construction activity, while future initiatives such as LSS6 and the Corporate Renewable Energy Supply Scheme (CRESS) could extend the investment cycle from 2027 onwards.
The research house believes ongoing solar expansion will require significant upgrades to grid infrastructure to integrate new renewable generation capacity.
RHB said the current investment cycle is increasingly favouring mechanical and electrical (M&E) contractors as well as cable manufacturers, rather than traditional mechanical, electrical and plumbing (MEP) contractors.
The research house attributed this to the concentration of investment at the medium- and high-voltage grid level, where larger transmission projects present higher barriers to entry and stronger earnings visibility.
Grid reinforcement works linked to Tenaga’s transmission upgrades, data centre connections and renewable energy integration are expected to account for the bulk of new project awards over the coming years.
As project sizes continue to increase, access to financing is emerging as a key competitive advantage.
RHB noted that larger contracts require greater upfront working capital to fund supplier payments, performance bonds and procurement of high-voltage cables.
This is expected to favour listed companies with stronger balance sheets and easier access to funding, while smaller contractors may struggle to compete for larger projects.
The research house believes this trend could lead to greater market concentration among established industry players.
RHB also expects the sector to attract wider institutional participation as more companies migrate from Bursa Malaysia’s ACE Market to the Main Market.
The research house said many power infrastructure companies currently remain listed on the ACE Market, limiting investment from larger institutional funds.
As earnings grow alongside the ongoing infrastructure cycle, Main Market transfers could improve liquidity, broaden the investor base and support valuation re-ratings.
Given the favourable industry outlook, RHB maintained “Buy” recommendations on MNH Global Assets Berhad and SCG Berhad.
The research house also initiated coverage on EIPower and UUE Holdings Berhad with “Buy” ratings, citing their strong exposure to the expanding power infrastructure investment cycle.
RHB said it remains selective within the sector, favouring companies with stronger order book visibility, proven execution capabilities and sufficient financial capacity to undertake increasingly larger projects.
