PETALING JAYA: The average RM86bil worth of development expenditure (DE) planned under the 13 Malaysia Plan (13MP) will help anchor order-book prospects for the construction and building materials sector.
CIMB Research noted that apart from the 13MP, which runs from 2026-2030, the sector could also eye further development fund injections from government-linked entities of about RM120bil and public-private partnership (PPP) undertakings that could be worth as much as RM61bil.
“Tender momentum has shown signs of early acceleration, evidenced by recent awards of two Penang Mutiara Line light rail transit (LRT) piling packages worth RM101mil to Econpile Holdings Bhd
and the RM1.1bil Limbang Section 1 package for Sarawak’s Northern Coastal Highway, secured by the joint venture between Naim Holdings Bhd and Gamuda Bhd,” the research house wrote in a sector report.
The research house also expects a step-up in policy support and infrastructure stimulus ahead of the upcoming state elections in Johor, Melaka and Sarawak without discounting more DE in Sabah post its recent state election.
Some of the big-ticket public infrastructure jobs for contracts and materials suppliers to consider include the Mutiara Line LRT systems package (worth RM3bil to RM6bil) as well as the main terminal building works at the Penang International Airport (RM1bil), not to mention the elevated automated rapid transit or e-ART system in Johor.
Others major projects include the large-scale solar six scheme (RM6bil), the Northern Perak Water Supply Scheme (RM5bil), the Ulu Padas Water Supply Scheme (RM5bil) and the rollout of new phases or projects in Sarawak such as the RM2.9bil Trans Borneo Highway, the Sarawak-Sabah Link Road, Kuching Autonomous Rapid Transit and Northern Coastal Highway.
“With an estimated RM15bil in savings from targeted subsidy reforms in 2026, we opine this provides the federal government with greater fiscal leeway to revisit the Mass Rapid Transit 3 project once the land acquisition process is completed by end-2026,” CIMB Research noted.
Another mega-project to consider is the potential revival of the multi-billion-ringgit KL-Singapore high-speed rail project.
In the near term, there are eight major data centre contracts worth some RM13bil to RM14bil and five pure mechanical and electrical jobs that could be awarded by mid-2026.
As it stands, CIMB Research projects the construction sector’s core earnings to grow by 26% in 2026 and 28% in 2027 due to project flows under the 13MP and backed by order book cover of three times as at the end of the third quarter of this year.
It, however, warned that the recent 15% to 40% spike in logistics and key input costs could delay project deliveries and elevate margin risk for domestic projects.
The relief measures under the expanded sales and service tax, however, would help soften the impact on construction costs, particularly due to the splitting of contracts between materials and services and the exemptions given for residential components in mixed-use projects.
Unsurprisingly, CIMB Research has maintained its “overweight” call on the construction and materials sector for the first half of 2026.
Its top sector picks with a “buy” call are Gamuda and IJM Corp Bhd due to their improved order flows, diversified earnings base and growing international footprint. It has a target price of RM6.70 a share for Gamuda and RM3.60 for IJM Corp.
“We also believe that industry consolidation and new PPP-based concessions could emerge as valuation wildcards that could stimulate investor interest in Malaysian contractors,” it stated.
CIMB Research’s other “buy” calls are on Malaysian Resources Corp Bhd for alpha exposure and Econpile for exposure to small-cap players.
