Telekom Malaysia Bhd (TM) is set to enhance its long-term prospects through a proposed data centre joint venture (JV) in Johor. Analysts are optimistic about the project’s potential, agreeing that it will significantly boost TM’s revenue and earnings growth in the coming years.
On Tuesday, TM officials announced plans to establish a 51:49 JV with Nxera MY Pte Ltd, a subsidiary of Singapore Telecommunications Ltd (Singtel), to develop a 64-megawatt (MW) data centre in Johor. The first phase of this JV is expected to be operational by 2026, with the aim of ultimately reaching a capacity of 200MW. TM’s equity commitment for the JV is estimated at RM588 million.
According to CGS International (CGSI) Research, the investment in the data centre will more than double TM’s effective data centre capacity, creating a significant new growth avenue for the company. CGSI Research acknowledged that while TM would assume operational risk from the investment, these risks could be mitigated given the current demand dynamics and the strong partnership with Singtel, which collaborates with global private equity firm KKR in the data centre business.
“Investors should view this investment positively, as it could provide TM with an additional earnings growth avenue and potentially higher future return on equity ratios,” CGSI Research noted. The development is expected to incrementally benefit TM’s revenue and net profit growth and serve as a re-rating catalyst for TM’s shares, currently trading at an undemanding 13.7 times the estimated price-earnings ratio for the financial year ending Dec 31, 2025.
Meanwhile, UOB Kay Hian (UOBKH) Research maintained its “hold” rating on TM, noting that the positive news had been partly priced in. However, UOBKH raised its target price for TM to RM7 from RM6.50, incorporating the 64MW data centre expected to be operational in 2026
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