Who Are the Potential Beneficiaries in Malaysia's Data Center Supply Chain?
Amid the global wave of Artificial Intelligence, Malaysia is pushing forward with the construction of data centers.
Since the end of last year when NVIDIA collaborated with YTL Power to establish a $4.3 billionAIdata center park, international investment in Malaysian data centers has significantly increased.
In early May, Microsoft announced a $2.2 billion investment in Malaysia's AI infrastructure and plans to purchase land in Kulai, Johor, to set up a new data center. Sime Darby Property, in collaboration with its partner Pearl Computing, is developing a data center on a 49-acre site within the 1,500-acre Elmina Business Park in May.
Investors are closely watching which companies may benefit from Malaysia's push to build data centers.
Below are popular targets in each sector of the data center supply chain, as well as their year-to-date gains and losses:
Malaysia's data centre industry has had a significant impact on the local real estate sector due to the expansion of data centres in Kuala Lumpur and Johor. The boom in demand for data centres has attracted a wide range of investors, including real estate investors.
Furthermore, Johor is becoming an increasingly important location for data centres in Malaysia, with Penang also emerging as a leading centre for industrial and economic activity, resulting in strong demand for industrial real estate in the region.
A group of companies have received a boost in the AI wave, including $SIMEPROP (5288.MY)$, $MAHSING (8583.MY)$, $SPSETIA (8664.MY)$, $IOIPG (5249.MY)$, $UEMS (5148.MY)$, $ECOWLD (8206.MY)$, $KSL (5038.MY)$.
Of these, Sime Darby Property has risen over 120% this year, while Mahsing has risen over 110%.
In the previous article, we elaborated on the current situation and performance of the Property Sector in Q1.
A surge in construction shares has propelled the Bursa Malaysia Construction Index to a six-year record, driven by the excitement surrounding data centres and the rising number of contracts awarded to construct such facilities, in response to the increasing demand for computing power to support generative AI.
Many companies in the construction sector have achieved significant growth, with Sunway Construction Group recording over 80% growth so far this year and Gamuda rising over 40% since the beginning of the year. In addition, companies such as $IJM (3336.MY)$, $MGB (7595.MY)$, $GADANG (9261.MY)$, $MNHLDG (0245.MY)$, and $JTGROUP (0292.MY)$ are also worth watching.
"We foresee more positive newsflow going forward, because as you can already see some land transactions taking place now, which will potentially lead to more data centre contracts. PE [price-to-earnings] ratio can run high. During the years of MRT awards, you can see their [construction stocks'] PE went above 20 times,” said Affin Hwang Investment Bank head of research Loong Chee Wei when contacted.
The construction of data centers has boosted the demand for energy such as hydro and related companies have seen tremendous gains. Companies worth paying attention to include $YTLPOWR (6742.MY)$, $YTL (4677.MY)$, $TENAGA (5347.MY)$, $PETGAS (6033.MY)$, and $RANHILL (5272.MY)$.
YTL Group's performance this year has been remarkable, with YTL Power rising as much as 98.82% and YTL recording a gain of 89.42% so far this year.
Moving forward, according to Hong Leong Investment Bank, the YTL group is expected to achieve stronger earnings over the next three financial years, driven by an anticipated turnaround in its UK-based wastewater management subsidiary Wessex Water, as well as contributions from its data centers. "The group has an advantage as Nvidia's preferred partner in Malaysia for AI-Cloud service provider compared to other data center owners, as converting a conventional data center to an AI-data center infrastructure is difficult and costly," Hong Leong Investment Bank noted.
Companies such as $TM (4863.MY)$, $AXIATA (6888.MY)$, $MAXIS (6012.MY)$, $CDB (6947.MY)$, and $TIMECOM (5031.MY)$ are worth investors' attention due to their involvement in the architecture and services for data centers and networks.
Telekom Malaysia, in particular, has seen a significant increase of 24.47% in their share price this year.
On June 18, Telekom Malaysia has announced its partnership with Singapore Telecommunications ( $Singtel (Z74.SG)$) to establish greenfield data centre facilities in Iskandar Puteri, Johor. The data centre will lay a robust foundation for TM to capture the rising demand and opportunities from the next generation of AI application providers, hyperscalers, over-the-top service providers, multinationals, and enterprises.
The opportunities brought by data centers will also boost the technology sector. With the significant increase in international investment in Malaysian data centers, technology-related companies such as $INARI (0166.MY)$, $VITROX (0097.MY)$, $MPI (3867.MY)$, $SNS (0259.MY)$, $CLOUDPT (0277.MY)$, $JCY (5161.MY)$, and $NOTION (0083.MY)$ are worth watching. Notion has seen the largest gain, with an annual increase of over 500%.
In this sector, investors can pay attention to companies such as $PWRWELL (0217.MY)$, $PASUKGB (0177.MY)$, $KJTS (0293.MY)$, $DUFU (7233.MY)$, $MCEMENT (3794.MY)$, and more.
Areca Capital Sdn Bhd CEO Danny Wong believed that the strong momentum in both construction and technology counters would be sustainable, driven by the data centre craze which would benefit both upstream and downstream components.
He said companies involved in the construction, power cables, substations, infrastructure, mech engineering and ventilation systems will benefit even before the data centres start their operations.
"The later parts of the supply chain like UPS [uninterruptible power supply], hardware and servers, transceivers, and HDD [hard disk drives] components are highly connected to the strong demand of data centre theme," he added.
Source: moomoo, Bloomberg, The edge malaysia
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Malayneum HD : That's exactly what I thought SUPPOSE to be based on recommendation of companies listed in this article.
But the investors still not yet pick up the pace full speed.
Still gear 2 it seems in terms of actual sentiments on markets.
Paul Bin Anthony : very good in the second home
Paul Bin Anthony : very good in the second home
Xyno : All these data centres have one thing in common; they require massive amounts of electricity for power and cooling of IT equipment making use of power hungry AI processors.
With a monopoly in hand, you can easily forecast who will long term benefit from this so as long as they are capable to deliver the electricity demand from the market.
103493389 : Why no $KENERGY (0307.MY)$ inside the list?
ys101490435 : $PASUKGB (0177.MY)$ It's still sleeping in here![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
The stock price hasn't moved, and I haven't woken up![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
Shares of![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
Paul Bin Anthony : very good in the world
Muhammad M A : Anyone can spot me which companies are peers of an upcoming IPO UUE?![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
Paul Bin Anthony : very good test for the world with this
Paul Bin Anthony Xyno : TQ
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