PETALING JAYA: The construction sector is on track to record its highest annual domestic contract awards in 2026, supported by sustained data centre (DC) investments, recovering commercial and residential projects, and an anticipated pickup in infrastructure spending, say analysts.
Hong Leong Investment Bank (HLIB) Research said domestic contract awards to listed contractors reached RM18.7bil in the third quarter of financial year 2026, up 10% quarter-on-quarter and 75% year-onyear (y-o-y), bringing the nine-month total to RM46.4bil, a 17% increase from a year earlier.
“The sector is on track to close the year with a record award tally, surpassing the RM56bil recorded in 2016,” the research house said.
The strong performance was largely driven by RM10bil in DC-related awards during the quarter, alongside improving conversion of commercial and residential projects.
Among the notable contract wins were Gamuda Bhd
’s three hyperscale data centre packages in Port Dickson, Negri Sembilan, worth a combined RM5.3bil, and Kerjaya Prospek Group Bhd’s maiden DC contract worth RM858mil.
Infrastructure activity also remained resilient, supported by the RM3bil Penang Light Rail Transit (LRT) Mutiara Line systems package awarded to the Malaysian Resources Corp Bhd-Theta Edge Bhd joint venture.
HLIB Research expects the momentum to continue into the fourth quarter, supported by a healthy pipeline of DC opportunities, the Northern Perak water supply project and the Penang LRT Mutiara Line’s second civil, mechanical and electrical package.
Looking ahead to 2027, the rollout of the Corporate Renewable Energy Supply Scheme could provide another source of construction jobs as demand for green electricity rises.
The scheme is expected to benefit from a reduced system access charge of 14 sen per kilowatt-hour and an end-2028 commercial operation deadline.
The Johor Elevated Autonomous Rapid Transit (e-ART) project could also drive contract flows next year, although the timing of the Mass Rapid Transit 3 project remains uncertain.
HLIB Research has maintained an “overweight” call on the construction sector, citing resilient earnings prospects and continued private-sector job flows.
The research house named Gamuda – with a target price of RM5.75 – as its preferred large-cap pick, and Inta Bina Group Bhd – with a target price of 76 sen – as its preferred small-cap pick.
Meanwhile, UOB Kay Hian (UOBKH) Research said Budget 2027’s RM83bil development expenditure – up 2.5% y-o-y – reinforced the government’s expansionary spending stance, but offered limited visibility on new projects for contractors under its coverage.
Including investments by public-private partnerships, federal statutory bodies and government-linked investment companies, total public development expenditure is expected to reach RM133.2bil in 2027, compared with RM131.8bil in 2026.
However, the research house noted the absence of newly announced mega projects, which could limit the immediate benefits to listed construction companies.
Projects highlighted in the budget include Johor’s e-ART initiative, the RM2.5bil National Non-Revenue Water programme and various flood mitigation works.
Moreover, UOBKH Research pointed out that the reinstatement of the variation of price clause for diesel and bitumen cost increases could ease cost pressures on smaller contractors undertaking eligible government-related projects worth up to RM5mil.
Meanwhile, an analyst told StarBiz that the increase in the minimum wage from RM1,700 to RM2,000 – effective July 2027 – is expected to have a manageable impact on larger contractors, many of which already pay construction workers above the existing minimum.
