PETALING JAYA: Large contractors are expected to continue commanding a lead in securing data centre (DC) projects in the second half of financial year 2026 (2H26) while the pipeline of jobs for public infrastructure is re-emerging as projects under the 13th Malaysia Plan (13MP) gain traction, says MBSB Research.
It has maintained a “positive” stance on construction stocks, despite government statistics showing that growth in the construction sector eased to 6.6% in the second quarter of financial year 2026 (2Q26) year-on-year compared to 7.7% in 1Q26.
It noted that the data showed growth in the construction sector remained broad-based, led by non-residential buildings and specialised construction activities – which include DC core and shell and mechanical, electrical and plumbing fit out works.
Construction Industry Development Board data also showed a total of 9,539 projects worth RM131.3bil were awarded in the first seven months of 2026, which accounts for 54.3% of last year’s total awarded project value.
It said the outlook for construction stocks would be underpinned by a two-pronged growth engine from record DC awards and an improving public infrastructure pipeline. “DC awards have reached RM9.7bil in August 2026, already surpassing 2025, with larger contract sizes and follow-on hyperscale opportunities bolstering further order book growth.”
On the public infrastructure front, there could be RM12bil to RM14bil of visible awards in 2H26 led by the second package of the Penang light rail transit, the second phase of the Langat water infrastructure project in Selangor, and the Kerian water initiative under the Northern Perak Water Supply Scheme.
MBSB Research said administrative tailwinds could accelerate planned infrastructure rollout under Budget 2027.
“Beyond the near term, the RM430bil 13MP development expenditure envelope for 2026 to 2030 should underpin the next replenishment cycle, with Sabah and Sarawak featuring prominently as infrastructure gaps are addressed.”
“Budget 2027 remains a key watch area for the potential of further acceleration in rail, water, grid and flood-mitigation spending ahead of the 16th general election,” it said, expecting a better pick-up in DC job flows in 2H26, with the finalisation of up to six large-scale DC facilities worth RM1bil to RM2bil each.
“With record order books increasingly moving into peak execution, we expect stronger earnings conversion and sustained job replenishment into financial year 2027 (FY27) to FY28, while cost pressures should remain manageable for larger contractors with stronger contractual protection,” MBSB Research added.
Among construction stocks, it has maintained a “buy” call on Sunway Construction Group Bhd
, but raised the target price (TP) to RM9.18 from RM8.81 previously, derived by pegging the FY27 earnings per share (EPS) of 36.7 sen to a higher price-to-earnings ratio (PER) of 25 times.
“Meanwhile, we also maintain our ‘buy’ call on IJM Corp Bhd and raise our TP to RM3.17 (from RM2.82 previously), derived by pegging the revised FY27 EPS of 12.9 sen to a higher PER of 24.5 times,” MBSB Research said.
Other top picks include Gamuda Bhd with a “buy” call and TP of RM5.60, as well as Malayan Cement Bhd, with a “buy” call and TP of RM10.
