Malaysia’s electrical firms to gain from data centre boom: JP Morgan report

[KUALA LUMPUR] Malaysia’s electrical companies are benefiting significantly from a data centre boom in the country, said a report by JPMorgan.

The bank’s analysts said that the market capitalisation of mechanical, engineering and plumbing (MEP) businesses has compounded by nearly three times from 2024 to late 2025, and MEP-linked stocks have more than doubled.

Calling electricians the “next billionaires”, the analysts added that Malaysian companies are also dominating the electrical sub-segment of the MEP sector, and are most competitive in carrying out electrical works and supplying equipment, the “largest and most technical portion of the scope”.

Their influence has drawn in newly listed companies, which are aiming for engineering, procurement, construction and commissioning (EPCC) and equipment-supply opportunities.

“Underappreciated” beneficiary of data centres

Despite the growth, the report labelled the MEP sector as “an underappreciated second-layer beneficiary with meaningful upside ahead”, with low data centre utilisation at 17 per cent, a figure stated by Tenaga Nasional (TNB), a leading energy brand in Malaysia.

However, a large part of the supportive infrastructure for data centres, such as a grid supply, is already in place.

Delays are now in the construction of physical buildings and MEP systems, with some of the latter being under construction or pending being awarded to contractors.

Once completed or awarded, the packages could “trigger positive rerating catalysts”, the report said. This refers to the companies involved seeing an improvement in their market valuations.

Gap between grid-level readiness and data-hall energisation

Meanwhile, opportunities in the mechanical sub-segment are usually given to specialists in the South-east Asian region due to the complexity and reliability standards for cooling systems of data centres.

Main contractors often handle the in-house execution within the plumbing sub-segment.

TNB said 3.5 gigawatts (GW) of data centre projects are “completed”, which JPMorgan’s analysts said largely reflects grid-level readiness over full data-hall energisation.

This, the analysts said, is in line with the current low utilisation of 0.6 GW, and JPMorgan’s internal tracking of only 0.5 GW of data centre capacity being live and operational.

The gap highlights that there are MEP works still ongoing.

“As the 3.5 GW of grid-ready capacity gradually converts into fully energised halls, we expect sustained job flow and steady revenue recognition for MEP contractors over the next 12 to 18 months,” the report said.

Major consolidation for MEP sector

With RM15 million (S$4.7 million) per megawatt for the MEP sector, the analysts estimate a total addressable market of RM43 billion over the next five years.

Alongside South-east Asia deployments being scaled up by cloud service providers, regional electrical original equipment manufacturers are being fully integrated into the MEP sector, the report said, citing global conglomerate Teco Electric & Machinery’s offshore wind business as an example.

“This raises the competitive bar for Malaysian players, where margins for smaller firms may compress,” JPMorgan said.

MEP packages are also expected to consolidate from about five scopes to being divided into two to three large turnkey bundles.

Established EPCC-capable companies are likely in a better position than newer businesses without a proven track record.

The latter may face a “steeper uphill”, possibly resulting in more mergers, acquisitions and industry consolidation, the report said.