Kenanga Research maintained its “overweight” call on the construction sector.
PETALING JAYA: The construction sector is expected to sustain its momentum into the fourth quarter or 4Q of this year on sustained public and private infrastructure project executions.
There are several high-profile projects which are running concurrently, and these include the Penang light rail transit (LRT) Mutiara Line packages two and three, the KL mass rapid transit circle line, the Penang Airport expansion, Phase 2 of the Pan Borneo Highway, the Sabah-Sarawak Link Road, the Subang Airport redevelopment and the Johor LRT and automated rapid transit.
According to Kenanga Research, the construction sector would also be supported by continued interest in data centre investments into the country. It noted recently two US-based technology giants, Microsoft and Pearl Computing, had acquired land in Malaysia for data centre expansion.
“Gamuda Bhd
had sold a 389-acre parcel of land in Springhill Industrial Park, Port Dickson, to Pearl Computing for RM455.2mil in May, alongside RM1bil in enabling infrastructure works.
“This positions Gamuda well for future projects on the site, which can support 800 to 1,000MW of data centre capacity, translating into RM14bil to RM20bil worth of contracts,” Kenanga Research said.
It also noted current valuations for larger capitalised construction stocks remain close to their five-year high averages.
“The construction sector has outperformed this year, largely driven by the data centre boom, with the KL Construction Index up 8% in the year-to-date versus the FBM KLCI’s minus 3% performance.
“Within our coverage, Sunway Construction Group Bhd (SunCon) led the gainers, followed by Kimlun Corp Bhd and Gamuda. Valuation-wise, the bigger caps, Gamuda, SunCon and IJM Corp Bhd, are trading at 2026 forward price-to-earnings ratios of 19.2 times, 21.8 times and 17.8 times, compared to their five-year averages of 18.3 times, 23 times and 17.1 times, respectively,” the research house said.
It maintained its “overweight” call on the construction sector on persistent demand from data centres, fuelled by sustained capital expenditures from global technology firms.
All stocks under its coverage are rated an “outperform”, it noted.
