TNB’s Grid Expansion Bodes Well For Power Sector
Hong Leong Investment Bank Bhd (HLIB) has maintained its OVERWEIGHT stance on the power infrastructure sector, with BUY calls on MN Holdings Bhd (MNH) (target price: RM1.88), Southern Cable Group Bhd (SCGBHD) (TP: RM1.90) and SMRT (TP: RM2.19), citing sustained momentum from grid expansion, record-high power demand and data centre growth.
HLIB noted that Tenaga Nasional’s investment in grid infrastructure is accelerating under the RP4 period, with an estimated RM3–3.5 billion annually going into transmission and distribution (T&D). This translates into RM6.7–7.8 billion in job opportunities within the transmission substation segment for mechanical and electrical (M&E) players, excluding additional consumer-side substations.
The bank expects this spending momentum to continue into RP5 (2028–2030), with Tenaga’s total grid investment plan potentially reaching RM90 billion, of which RM47 billion could be allocated to infrastructure upgrades during RP5 alone.
Malaysia’s power infrastructure demand is strengthening, supported by peak electricity demand reaching 21,049MW on May 28, 2025, a 10.4% year-on-year increase, far surpassing the Energy Commission’s earlier forecast. The rise is largely attributed to load acceleration from data centres, with utilisation increasing to 485MW in March 2025 from 148MW a year earlier.
The Energy Commission has initiated tenders for additional gas-fired capacity through 2029 to maintain reserve margins, while national renewable energy (RE) targets of 31% by 2025 and 40% by 2035 further strengthen the investment case.
HLIB highlighted that data centre electricity demand could surge to 12.9GW by 2030 and 20.9GW by 2040, up from 6.4GW in signed capacity currently. Tenaga is already developing multiple 500kV main intake substations across key data centre clusters in Cyberjaya, Sedenak and Nusajaya to pre-empt future demand. The trend is mirrored by a wave of data centre-linked land deals, including recent transactions by Microsoft, Equinix and other global operators across Johor, Port Dickson and Selangor.
SCGBHD’s FY26 and FY27 earnings were revised upwards by 2% each on improved margin assumptions driven by a better product mix. HLIB has rolled forward its valuation base year to FY26F, resulting in a higher target price of RM1.90 from RM1.69 previously. The stock is trading at a forward fully diluted fair value of RM1.90, based on 1.2 billion shares including warrants.
HLIB said domestic power infrastructure players are well-positioned due to capital access, scale and favourable policies, such as MIDA’s cable import restrictions and Tenaga’s preference for local contractors. These conditions have created structural advantages for Malaysian firms and reduced foreign competition.
HLIB reiterated that the sector has yet to reach its cyclical peak, driven by rising infrastructure requirements, aggressive grid upgrades and increasing data centre energy needs. With a robust pipeline and strong policy tailwinds, it expects the current upcycle to continue, making MNH, SCGBHD and SMRT key beneficiaries of Malaysia’s power infrastructure expansion.
