Three Major Catalysts Driving Construction Stocks
1. Large-Scale Infrastructure Projects on the Horizon
The Malaysian government is set to launch a series of large-scale infrastructure projects, such as MRT3 and the Penang Light Rail Transit (LRT). These projects, involving investments totaling billions of ringgit, present significant opportunities for the construction industry.
Leading industry player $GAMUDA / 5398 (GAMUDA BERHAD) has already secured contracts for these projects, ensuring a full order book. Other companies, including $IJM / 3336 (IJM CORPORATION BERHAD), $SUNCON / 5263 (SUNWAY CONSTRUCTION GROUP BERHAD), and $KERJAYA / 7161 (KERJAYA PROSPEK GROUP BERHAD), are actively bidding and are likely to secure substantial contracts in the coming years.
The MRT3 project, one of the most anticipated, is expected to begin awarding civil engineering contracts in 2025. This will create significant opportunities for companies with expertise in railway construction, such as Gamuda. Meanwhile, companies like SUNCON, IJM, and $WCT / 9679 (WCT HOLDINGS BERHAD) are also expected to benefit from elevated track and station construction contracts.
2. Data Center Construction Boom
With the rapid development of the digital economy, Malaysia's data center market is quickly emerging, creating new growth opportunities for construction companies.
SUNCON has excelled in the data center construction sector, securing three projects valued at RM4.1 billion. GAMUDA has also won a RM1.7 billion mega data center construction contract in SIMEPROP's Elmina Business Park. IJM has joined the data center construction race, with its wholly-owned subsidiary securing a RM331.7 million contract to build Block 2 of the Iskandar Puteri Data Center for TM Technology Services Sdn Bhd.
The data center construction boom not only offers opportunities for large construction firms but also for SMEs in the supply chain. Companies providing construction materials, equipment, and services will benefit from the growing demand.
3. Revival of Private Sector Demand
Malaysia’s real estate market, particularly in Johor and Penang, is gradually recovering. This will drive demand for private construction projects, including residential, commercial, and industrial properties. Companies like KERJAYA and SUNCON, which have close ties with real estate developers, are well-positioned to benefit from this trend.
KERJAYA expects 40-50% of its annual new orders to come from its sister companies, E&O and KPPROP. SUNCON will also receive substantial internal orders from its parent company, SUNWAY. These stable order sources will provide the company with steady revenue and profit growth.