KUALA LUMPUR (July 27): Malaysia is set for a spending spree totalling over RM22 billion on water infrastructure in the next five years that will spark an industry upcycle, said Maybank Investment Bank (Maybank IB).

After many attempts in the past, the current capital expenditure upcycle should materialise thanks to water tariff reforms and higher demand from data centres, the research house said, noting the value of projects under design have surged sixfold in 2025 from 2021, the house noted.

“We see this as a key leading indicator of future contract awards,” Maybank IB said.

The planned investments come at a time of mushrooming data centre projects in Malaysia to cater to surging demand for advanced computing and artificial intelligence.

Data centres require massive amounts of water to cool their equipment and authorities have also been calling for greater spending on the country’s ageing water infrastructure to repair leaking pipes and upgrade treatment plants.

The planned spending is largely directed at new water treatment plants and pipe replacement. Maybank IB expects “this pipeline to generate sizeable opportunities for listed contractors and water infrastructure suppliers”.

Gamuda Bhd (KL:GAMUDA) and Engtex Group Bhd (KL:ENGTEX) would be the direct beneficiaries while SD Guthrie Bhd (KL:SDG) and Ranhill Utilities Bhd (KL:RANHILL) offer indirect exposure, the research house said.

Malaysia unveiled the Water Sector Transformation 2040 plan that led to nationwide water tariff increases to narrow the gap with costs, improving operators’ cash flows and support more timely lease payments to Pengurusan Aset Air Bhd.

That gives confidence to the company responsible for constructing and improving most water infrastructure in Peninsular Malaysia to develop more water infrastructure, and even allow state water operators to develop their own water infrastructure, Maybank IB added.