Tapping water’s investment potential

MALAYSIA is set for a transformation in water management as the government and private sector intensify efforts to tackle non-revenue water (NRW) losses, offering a potential lift to investors positioned in the right segments.

NRW – treated water lost through leaks, inaccurate metering, or operational inefficiencies – remains a persistent issue, with national levels at 37.1% in 2024, well above international best practice of 15% to 20%.

Addressing this gap is increasingly being framed not just as an operational necessity but as an environmental and social priority.

In this context, CIMB Research sees a significant investment opportunity.

“In our view, Malaysia’s NRW investment opportunity lies in both digital water enablement and physical water infrastructure,” the brokerage notes.

According to the research house, the potential beneficiaries can be divided into three main categories: direct digital or NRW enablers; physical execution and rehabilitation beneficiaries; and broader utility or water capital expenditure (capex) beneficiaries.

Direct digital beneficiaries are companies whose solutions improve water efficiency, network visibility, and leakage control.

“Digital solution providers offer the cleanest direct exposure to water efficiency, monitoring, and optimisation, while engineering contractors and utility-linked names offer broader exposure to the capex cycle around rehabilitation, treatment, and distribution,” CIMB Research says.

SMRT Holdings Bhd is included as a secondary digitalisation beneficiary through its Air Selangor exposure, though it is less direct than Insight Analytics Bhd’s (IAB) water-focused positioning, it argues.

Potential beneficiaries

Among listed companies, IAB has emerged as the leading direct beneficiary, as CIMB Research sees it.

It highlights that IAB’s offerings span water management technology and intelligent asset management, giving it a central role in monitoring, visibility, and optimisation – the key layers relevant to NRW reduction.

“Our preferred direct thematic exposure remains IAB,” CIMB Research states.

“The group is positioned around water management technology solutions across the utility water supply chain and has expanded into intelligent asset management solutions, placing it close to the monitoring, visibility, and optimisation layers that are increasingly important for sustainable NRW reduction,” it adds, noting this fits well with the Water Sector Transformation 2040 (WST 2040), which emphasises smart technologies, integrated data, and science-based decision making.

The brokerage also highlights the environmental, social and governance (ESG) alignment of IAB, stating that the company is the “strongest ESG fit”, in its view.

“It sits closest to water-efficiency improvement, system visibility and governance enhancement through better measurement and decision support,” CIMB Research points out.

Recent project wins in Sarawak demonstrate that the company’s exposure is not only thematic but commercially relevant, reinforcing its position as a strategic player in Malaysia’s digital water transformation, the brokerage adds.

SMRT benefits through its project work with Air Selangor, which is advancing smart metering, operational data integration, and broader digital utility capabilities. While not as directly tied to NRW-specific solutions, the company provides a meaningful read-through on utility digitalisation.

CIMB Research notes the company’s positive ESG read-through via utility digitalisation, operational efficiency and improved service management, though less direct than a water-specific digital solutions provider.

On the physical execution side, Salcon Bhd has direct exposure to NRW-related works and broader water and wastewater engineering projects.

It stands out as a clear beneficiary of pipeline replacement, rehabilitation, and treatment infrastructure projects.

CIMB Research points to Salcon’s ESG credentials through “physical loss reduction and system upgrading, though less direct than digital enablers on data and governance benefits.”

Taliworks Corp Bhd is another name on the brokerage’s list, although its connection to NRW is less direct.

The company’s core water operations and supply-infrastructure exposure provide moderate ESG benefits through improved water-system resilience and infrastructure support.

Ranhill Utilities Bhd similarly offers utility-linked exposure, particularly in Johor, which touches on distribution efficiency and broader NRW-related system reforms.

CIMB Research observes that Ranhill provides “useful ESG exposure via reliability, utility efficiency and governance improvement, though less direct than a digital enabler”.

Addressing NRW

Undoubtedly, Malaysia’s NRW problem is both an environmental and operational concern.

High water losses mean that energy-intensive treatment and distribution efforts are effectively wasted, while communities suffer from unreliable supply.

Reducing NRW would lower raw water extraction, cut energy consumption, and shrink the sector’s carbon footprint.

At the same time, improved system efficiency strengthens the resilience of water supply, particularly in areas prone to disruptions, supporting the Sustainable Development Goal 6 (clean water and sanitation) and broader WST 2040 objectives.

The WST 2040 roadmap identifies a range of initiatives, from Industrial Revolution 4.0-enabled water technologies to public-private collaboration, with performance-based contracts for NRW reduction among its proposed implementation models.

“NRW reduction is a key pillar of Malaysia’s long-term water sustainability agenda under WST 2040, requiring large-scale investments across the next 10 years,” CIMB Research says.

This creates structural ESG investment opportunities across Malaysia’s water ecosystem, encompassing digital enablers, engineering contractors, and utility-linked companies.

For those investing in the sector, CIMB Research suggests that companies with strong digital or technology capabilities are likely to be better positioned than those solely dependent on traditional “pipes-only” capex cycles.

“WST 2040 suggests that the future NRW market in Malaysia should reward not just those who can replace infrastructure, but also those who can make the network more visible, measurable, and manageable,” the brokerage points out.