Introduction to Malaysia’s Construction Sector
The Malaysian construction and materials sector is poised for significant growth in 2025. With a focus on government infrastructure projects, public-private partnerships under the PIKAS 2030 Master Plan, and increased foreign direct investments (FDIs), the sector is expected to see better pricing power and a substantial acceleration in project awards. This article provides an in-depth analysis of the key companies in the sector, their performance metrics, and future prospects.
Highlighted Companies: A Comprehensive Analysis
Gamuda Berhad
Recommendation: Add | Target Price: RM5.71 | Current Price: RM4.74
Gamuda is positioned as a market leader in the Malaysian construction sector with a robust pipeline of projects. The company is expected to achieve its targeted RM40-45 billion contract flows ahead of the end of 2025. Construction margins are anticipated to recover due to increased domestic wins and strategic diversification into high-margin data center projects.
Gamuda’s industrialized building system (IBS) plant, branded as “Next-Gen Digital IBS,” enhances its speed-to-market capability, translating into faster project completion and superior pretax margins of 10-20%. Additionally, the company’s recent acquisition of 389 acres of freehold land in Port Dickson for RM424.4 million underscores its commitment to the data center space. Gamuda’s bundled “Land + Water + Power” offering is expected to deliver contracts worth RM19 billion over several years.
Key risks include delays in infrastructure rollouts and rising foreign worker levies. However, Gamuda’s strong balance sheet and experienced management team make it a preferred choice for large-scale projects under the PIKAS 2030 framework.
IJM Corporation Berhad
Recommendation: Add | Target Price: RM4.40 | Current Price: RM3.04
IJM Corporation is strategically positioned as a proxy for increased Chinese investments in Malaysia. The company is on track to exceed its RM5 billion new win target for FY2025, with year-to-date wins already at RM2.1 billion. IJM’s involvement in the expansion of the North Pantai Expressway under the PIKAS 2030 initiative further solidifies its standing in the sector.
IJM’s reputation in building works and its strong financial position make it a frontrunner for upcoming data center projects. The company has already secured two data center contracts from Telekom Malaysia. Additionally, IJM is one of the shortlisted consortiums for the Kuala Lumpur-Singapore High-Speed Rail (KL-SG HSR) project.
Potential challenges include rising raw material costs and uncertainties in project rollouts. Nevertheless, IJM’s diversified portfolio and strong execution capabilities position it for sustained growth.
Sunway Construction Group Berhad
Recommendation: Add | Target Price: RM6.00 | Current Price: RM4.63
Sunway Construction stands out with its first-mover advantage in data center construction, which accounts for 54% of its RM7.1 billion order book as of September 2024. The company’s integrated business model and strong execution record make it a preferred partner for large-scale projects.
Sunway Construction’s partnership with Engie Malaysia enhances its capabilities in renewable energy and sustainable construction. The company’s integrated construction and prefabrication hub (ICPH) in Singapore is expected to play a pivotal role in its data center projects.
Key risks include delays in project rollouts and increased competition. However, its strong order book and proven track record ensure long-term stability.
Small-Cap Companies: Emerging Opportunities
Muhibbah Engineering
Recommendation: Add | Target Price: RM1.34 | Current Price: RM0.81
Muhibbah Engineering is well-positioned to benefit from the revival of infrastructure projects in 2025. The company’s strong focus on niche engineering solutions and diversified revenue streams provide a competitive edge. Key growth drivers include its involvement in marine and industrial sectors.
HSS Engineers
Recommendation: Add | Target Price: RM1.48 | Current Price: RM1.03
HSS Engineers is a leading player in project management consultancy (PMC) and engineering design. With a 59.2% EPS growth forecast for 2025, the company is set to capitalize on the MRT 3 and KL-SG HSR projects. HSS Engineers’ involvement in these mega-projects underscores its technical expertise and strong industry standing.
Econpile Holdings Berhad
Recommendation: Add | Target Price: RM0.56 | Current Price: RM0.47
Econpile specializes in piling and foundation works, making it a key beneficiary of the anticipated uptick in government infrastructure spending. The company’s focus on cost management and operational efficiency positions it well to secure new contracts in 2025.
Sector Outlook and Key Risks
The Malaysian construction sector is expected to achieve a 29% EPS growth in 2025, driven by government infrastructure projects, data center developments, and increased FDIs. Key projects like the Penang LRT, KL-SG HSR, and MRT 3 are set to provide significant opportunities for contractors.
However, potential risks include delays in project rollouts, rising raw material costs, and changes in the political landscape. Companies with strong balance sheets and proven execution capabilities, such as Gamuda, IJM, and Sunway Construction, are best positioned to navigate these challenges.
Conclusion
Malaysia’s construction sector is on the cusp of a robust recovery, fueled by strategic government initiatives and increased private sector participation. Investors looking to capitalize on this growth should consider companies with strong order books, innovative capabilities, and proven track records. Gamuda, IJM, and Sunway Construction emerge as top picks, offering a blend of stability and growth potential.
