Infrastructure rollout to bolster construction stocks

PETALING JAYA: Select construction stocks are expected to remain in focus in 2026, supported by the rollout of major infrastructure projects in both Malaysia and Singapore.

Analysts remain upbeat on the sector, with research houses continuing to issue positive assessments.

RHB Research, which recently conducted a visit to Singapore covering property and real estate investment trusts, highlighted the strong construction demand in the republic.

Maintaining its “overweight” call on Malaysian construction stocks, the research house noted that Singapore’s Building and Construction Authority had projected annual construction demand of between S$30bil and S$46bil, from 2026 to 2029.

The firm expects Sunway Construction Group Bhd’s precast business to benefit from upcoming Housing Development Board (HDB) flat launches.

It has a “buy” call on the stock with a target price (TP) of RM7.32.

Other Malaysian builders poised to gain from their Singapore exposure include Pintaras Jaya Bhd (“buy”, TP: RM2.18) and IJM Corp Bhd (“buy”, TP: RM3.43), the latter through its 45.5%-owned subsidiary, Hexacon Construction Pte Ltd.

“Looking ahead, public residential contract flows may remain steady, with around 19,600 build to order flats slated for launch in 2026 (compared with 19,600 and 19,700 units in 2024 and 2025), including more than 4,000 flats with shorter waiting times of under three years,” RHB Research said.

Kenanga Research, which also maintains an “overweight” stance on the sector, said growth will continue to be supported by strong data centre demand and sustained capital expenditure commitments from global technology companies, despite slower-than-expected infrastructure rollouts in Malaysia.

It noted that construction stocks have enjoyed a strong two-year rally, with the KL Construction Index rising 70% across 2024 and 2025, driven largely by the rapid award of data centre contracts.

“With several near term data centre project awards in the pipeline, and overall development expected to extend well into 2030, we expect data centre-related contracts to remain the sector’s dominant growth driver in 2026,” it said.

Gamuda Bhd remains Kenanga’s top pick, with an “outperform” call and a TP of RM6.13.

The research house also continues to favour Sunway Construction and IJM, among the large cap names, assigning “outperform” ratings with TPs of RM6.50 and RM3.40, respectively.