MBSB Research has maintained its POSITIVE outlook on Malaysia’s construction sector, supported by record data centre contract awards and an expected acceleration in public infrastructure jobs in the second half of 2026.
The research house said data centre (DC) construction awards reached a record RM15.58 billion year-to-date, already 68.3% above the RM9.26 billion recorded for the whole of 2025. Gamuda, Sunway Construction (SunCon) and IJM collectively secured 87.8% of the awards.
Gamuda has emerged as the largest beneficiary with a 47.5% share of year-to-date DC awards, overtaking SunCon at 36.1%, while IJM accounted for 4.2%.
Average DC contract size has also increased 16.5% to RM1.04 billion, from RM892 million in 2025, reflecting the growing scale of hyperscale developments.
MBSB expects the momentum to continue, with up to six large-scale data centre facilities valued at RM1 billion to RM2 billion each potentially being finalised during the second half of the year.
RM12 Billion To RM14 Billion Public Jobs In Sight
Beyond data centres, MBSB estimates RM12 billion to RM14 billion of visible public infrastructure awards could be rolled out during 2H2026.
The Penang LRT CMC2 package, estimated at RM4 billion to RM5 billion and targeted for November, is expected to be a major near-term catalyst.
Other potential projects include Langat 2 Phase 2, estimated at RM3 billion to RM4 billion, Sungai Rasau Phase 2 at RM2 billion to RM3 billion and the RM4 billion to RM5 billion Kerian Water engineering, procurement, construction and commissioning project.
MBSB said these projects should support contractors’ order-book replenishment into year-end, while Budget 2027 could provide further impetus for spending on rail, water, electricity grids and flood mitigation.
The positive outlook comes as Malaysia’s construction sector extended its expansion to a 14th consecutive quarter, growing 8.8% year-on-year in 2Q2026 compared with 8.5% in the preceding quarter.
Construction work done reached RM47.8 billion during the quarter, taking the first-half total to RM94.3 billion, up 8.7% year-on-year.
Private-sector activity remained the main growth driver, contributing RM31.4 billion, or 65.8% of total work done, and expanding 11.4% year-on-year. Public-sector activity strengthened 4.1% to RM16.4 billion.
IJM Replaces Malayan Cement As Top Pick
MBSB named Gamuda, SunCon and IJM as its preferred construction plays, with BUY calls and target prices of RM5.60, RM9.18 and RM3.32, respectively.
IJM replaces Malayan Cement as a top pick, with MBSB highlighting the contractor’s RM18 billion tender pipeline and potential for stronger job wins during 2H2026.
The research house also sees value-unlocking potential from IJM’s RM3 billion three-year value realisation plan, which it estimates could translate into around 28 sen in annual dividends per share and an approximately 10% dividend yield.
MBSB said the longer-term construction outlook is further underpinned by the RM430 billion development expenditure allocation under the 13th Malaysia Plan for 2026-2030, with Sabah and Sarawak expected to feature prominently in the next project replenishment cycle.
