PETALING JAYA: The local construction sector’s prospects remain robust, supported by job flows from mega infrastructure development, new data centre builds and cheaper material costs.
Hong Leong Investment Bank Research (HLIB Research) noted that domestic contract awards in the first quarter of 2025 (1Q25) totalled RM16.4bil, which was 33% higher quarter-on-quarter and 135% higher year-on-year (y-o-y).
“The strong start in 2025 gives credence to our expectations of another healthy job-flow environment this year (2024: RM44.2bil) prolonging sector orderbook growth cycle.
“Meanwhile, 1Q25 was anchored by RM11.4bil worth of infrastructure jobs led by the Penang LRT-Segment 1 (RM8.3bil) and LRT 3 reinstatement (RM2.5bil),” the research house noted in a sector report.
It expects job flows, especially infrastructure-related, to continue for the rest of the year, leading with projects such as the Penang LRT’s systems package (worth RM3bil to RM4bil) and Segment 2 tender, both of which are anticipated to be held in the second half of 2025.
Other notable infrastructure projects include the Penang Airport’s work package 3, roads and highways including New Pantai Expressway 2.0 and Northern Corridor Highway, water projects, and hospitals.
Commercial and residential projects, however, could experience a slight moderation this year after an exceptional 2024, partly driven by Johor’s development reinvigoration and revamped Malaysia My Second Home programme.
The tariff issue could slow down industrial job flows in the near term amid a strategic reassessment, it added.
Meanwhile, MIDF Research said the construction sector is projected to grow by 12% in 2025 after the value of construction work done grew by 20.2% y-o-y to RM158.8bil in 2024.
The growth in 2025 will be supported by private sector jobs with a focus on industrial buildings, such as logistics warehouses, data centres and semiconductor foundries, and backed by infrastructure projects, such as the Pan Borneo Highway, East Coast Rail Link, RTS Link and the recently reinstated five LRT 3 stations.
MIDF Research said the construction sector is fundamentally a domestic-facing industry and does not rely on exports for revenue. As such, it is largely insulated from trade-related shocks, apart from potential cost pressures.
CIMB Securities noted that while the US tariffs may prompt near-term review for some major data centre players, Malaysia remains an attractive proposition as a physical location for such tech infrastructure.
It said moves to raise financing by promoters such as Bridge Data Centers and DayOne (formerly GDS International) suggest job-flow prospects remain intact.
Investor interest in construction stocks, however, would depend on abating of the macro headwinds and valuations, which then could encourage fund inflows in the sector’s companies after the recent selldown, said CIMB Research.
“Fresh contract momentum from the public infrastructure space (for example the Penang LRT, Penang Airport expansion and LRT 3 Phase 2) that has been steadily building up since early 2025 could prompt a new re-rating cycle for the sector,” the research house said.
MIDF Research remains positive on the sector, while HLIB Research has an “overweight” call with names like Gamuda Bhd
, Sunway Construction Group Bhd and IJM Corp Bhd listed as its top sector picks.
