KUALA LUMPUR, Sept 8, 2025 — Malaysia’s construction sector is experiencing unprecedented momentum, buoyed by massive investments in data centre projects that could be worth up to RM68.7 billion. But while analysts at RHB Investment Bank Bhd (RHB Research) remain bullish, maintaining their OVERWEIGHT stance on the sector, they also caution that an overreliance on data centre contracts could expose contractors to cyclical risks if the investment pipeline slows.
Sector Outlook: Busy Contractors, Record Work Value
The construction industry remains robust, with contractors riding a wave of both data centre and non-data centre projects. RHB’s coverage of nine listed contractors revealed that four companies, including SCGB and Kerjaya Prospek, exceeded earnings expectations in recent quarters, while five underperformed.
Contractors remain busy with existing and incoming jobs. Data from the Department of Statistics showed the total value of construction work in 2Q25 reached RM43.9 billion, marking a 13% year-on-year increase and the highest quarterly figure ever recorded.
Top sector picks remain Gamuda, Sunway Construction, and Binastra, reflecting their strong order books and execution capabilities.
Data Centres: A RM68 Billion Catalyst
The surge in demand for data centres is emerging as the single most significant driver of sector activity. RHB highlighted Tenaga Nasional’s five new electricity supply agreements signed this year for seven separate data centre projects, carrying a combined 733MW of electricity demand. Applying a conservative power usage effectiveness ratio of 1.4, this translates into about 524MW of usable capacity—worth roughly RM10.5 billion in construction value.
Geographically, three hotspots dominate Malaysia’s data centre buildout:
- Johor — with 1,473MW of committed capacity,
- Kuala Lumpur — with 960MW planned, and
- Port Dickson — where Pearl Computing Malaysia’s 389-acre site could host 500MW to 1GW of capacity.
Altogether, these hubs could deliver between 2,933MW and 3,433MW of data centre capacity, translating into construction opportunities valued at RM58.7 billion to RM68.7 billion.
Analysts, however, warned that while the data centre boom represents a transformative opportunity, the concentration of sector growth in this single sub-segment may leave contractors vulnerable to any slowdown in global hyperscale spending or shifts in foreign investment appetite.
Beyond Data Centres: Infrastructure Pipeline Remains Strong
RHB emphasised that the construction story is not confined to data centres. Major infrastructure projects are poised to complement growth:
- Johor’s Automated Rapid Transit system — valued at RM6–7 billion, with awards expected by year-end after three consortiums submitted proposals.
- Penang Light Rail Transit (LRT) — tenders for the initial phase, worth RM3–4 billion, are slated for the second half of 2025.
- Penang LRT Segment 2 (Komtar to Penang Sentral) — valued at RM5–6 billion, tenders could be advertised as early as October.
Looking further ahead, the upcoming 13th Malaysia Plan (2026–2030) will provide a record RM430 billion in development expenditure, creating sustained visibility for contractors across infrastructure, housing, and public works.
Valuations: Room to Re-Rate
At present, the Bursa Malaysia Construction Index is trading at a forward price-to-earnings multiple of 18.3 times. RHB noted that during the 2017 construction upcycle, valuations averaged 15–16 times, suggesting there is still room for further re-rating, especially with data centre contracts providing an additional layer of growth.
Risks on the Horizon
Despite the bullish outlook, RHB cautioned investors about several key risks:
- Slower-than-expected job rollouts from both government and private sectors,
- Labour shortages that could delay project delivery, and
- Potential scaling down of data centre investments if global hyperscale players recalibrate capital expenditure or shift to competing regional markets.
