PETALING JAYA: The construction sector is expected to maintain a positive trajectory for the remainder of 2026, although growth is likely to be more measured and selective than the strong expansion seen in recent years.
Industry forecasts generally point to mid-single-digit growth, supported by continued infrastructure spending, industrial development, and a surge in data-centre investments, said industry observers and experts.
“Recent construction activity data suggest that the sector entered the year with solid momentum, reflecting healthy demand across several key segments,” an analyst told StarBiz.
On the recently concluded financial reporting season (for the period ended March 31, 2026), he said construction companies generally delivered a solid set of results – adding, however, that performance varied across individual players.
“Key takeaways from the latest results season are that data centres remain the primary growth engine.
“Most major contractors reported healthy outstanding order books, supported by a steady flow of new project awards.
“These sizeable work-in-hand balances should continue to underpin earnings growth in the medium term.”
Meanwhile, an industry observer said operational performance was broadly positive.
“While revenue growth remained strong across much of the sector, results were mixed at the earnings level.
“Some companies exceeded expectations through better project execution and margin expansion, while others faced headwinds from cost pressures and project timing differences.”
BIMB Research in a report said the recent reporting season highlighted the growing divergence within the construction sector.
“Contractors with meaningful exposure to hyperscale data centres continued to deliver resilient earnings growth.
“Sunway Construction Group Bhd
(SunCon) remained the standout operational performer, supported by accelerated progress on data centre projects and a healthy tender pipeline exceeding 800 megawatts.
“We estimate this could translate into more than RM15bil of potential contract opportunities, providing strong medium-term order book replenishment prospects.”
The research house added SunCon also surprised positively with a dividend of 22.8 sen per share (7.6 sen interim and 15.2 sen special) for its first quarter of financial year 2026 (1Q26) – significantly higher than the five sen declared in 1Q25 – reflecting its strong cash position.
UOB Kay Hian (UOBKH) Research meanwhile said the 1Q26 results round-up showed mixed performances, but expects better progress billing for the rest of 2026.
“Under our coverage, SunCon, Kerjaya Prospek Group Bhd and Binastra Corp Bhd’s results were within expectations, while Gamuda Bhd, IJM Corp Bhd, Malaysian Resources Corp Bhd and WCT Holdings Bhd underperformed.
“Despite the mixed 1Q26 results delivery, most of the companies continued to register better earnings year-on-year (y-o-y) on the back of accelerated progress billing, improved profit margins, a robust order book in hand on sustained year-to-date job flows, and a pick-up in property sales.”
The research house said 1Q26’s quarterly value of construction work completed has continued to trend up to RM46.4bil (up 8.4% y-o-y).
“This represents the 18th quarter-on-quarter improvement in a row since 3Q21.
“The private sector remains the larger contributor, with 65.6% of total construction works done in the quarter.
“Geographically, Selangor, Johor, and Wilayah Persekutuan continue to represent the biggest contributors, at nearly 63.9% of the total works done in 1Q26,” it noted.
Looking ahead, UOBKH Research said the construction sector’s 2026 earnings visibility is still well backed by elevated outstanding order books.
“Recovering from the unprecedented sell-down stemming from the ongoing Middle East tensions, we expect the Malaysian construction sector to still deliver sequentially stronger earnings.
“This is largely underpinned by accelerated progress billing and improved profit margins from existing order books secured over the last one-to-two years.”
The research house remains optimistic that the sector is further supported by a huge pipeline of domestic infrastructure projects, as well as an upswing in project rollouts from the private sector, particularly within the data centre segment.
“We expect companies under our coverage to deliver an average earnings growth of 15% to 18% in 2026.”
Another industry observer said while the outlook is generally favourable for the construction sector, he cautioned that several challenges remain.
“Labour shortages continue to affect parts of the industry, particularly for skilled engineers, project managers, and technical specialists.
“These constraints may increase project costs and place pressure on delivery timelines.
“At the same time, the rapid growth of data-centre developments is creating greater demand for electricity and water resources, which could lead to infrastructure bottlenecks in certain locations.”
He added external economic conditions also present some uncertainty.
“Although Malaysia’s economy is expected to continue growing this year, factors such as geopolitical tensions, shifts in global trade patterns, and slower international demand could affect private-sector investment decisions and, in turn, construction activity.”
Nevertheless, he said that overall, the outlook for Malaysia’s construction sector in 2026 remains positive.
He reiterated that growth is increasingly being driven by infrastructure, industrial expansion and digital infrastructure projects.
“Companies positioned in these high-growth segments are likely to see the strongest opportunities over the coming year,” he said.
