Budget 2026 to boost construction industry

PETALING JAYA: Construction and materials stocks are set to benefit from the upcoming Budget 2026 to be announced in October following the tabling of the 13th Malaysian Plan (13MP) spanning 2026 to 2030 that saw an allocation of RM430bil for development expenditure over the period.

CGS International Research said Prime Minister Datuk Seri Anwar Ibrahim would set the tone for the 13MP through the rollout of key infrastructure projects in Budget 2026, unlike Budget 2025, when spending had been held back.

It said the government now has more revenue to fund these projects with its strong multiplier effects given the fiscal reforms.

The research house expects project rollouts to accelerate in 2026, given that the majority of projects tabled over the past few budgets have not been rolled out in a meaningful manner, apart from the Penang Light Rail Transit system, which has seen 56% of the total spent up until 2023 from the 12MP allocation.

The rail bridge from Penang Island to the mainland, the East Coast Rail Link, the Pan Island Link 1, more highway privatisation projects, gas-fired power plants, interstate water transfer between Perak and Penang, Johor Autonomous Rapid Transit and the third mass rapid transit line (MRT3) for the Klang Valley have been identified as projects scheduled to be rolled out in 2026.

“In our view, a few events transpired in the second quarter of 2025 which may point to more data centre (DC) awards in the second half of 2025 with momentum going into 2026,” it said, estimating that the number of DC tenders could rise to at least 13, including five involving Pearl Computing Malaysia Sdn Bhd, a Google Inc affiliate.

“In the building material space, like cement, there is also further evidence that the DC rollout has picked up steam with strong growth and margin expansion for Malayan Cement Bhd’s ready-mixed concrete division,” it said.

The research house has an “add” call on the stock with an unchanged target price (TP) of RM7.10.

It expects construction stocks to benefit as a whole from the projects to be announced, with MRT3 direct beneficiaries being Gamuda Bhd, YTL Corp Bhd and HSS Engineers Bhd.

It has an “add” call on Gamuda with a TP of RM7.30 and an “add” call on IJM Corp Bhd with a TP of RM3.61.

“For the next six months, we believe investors should focus on visibility of contract awards and headline news flow, and to a lesser extent on earnings delivery,” it said.