KUALA LUMPUR :Earnings for Malaysia’s listed construction companies are anticipated to show improvement in the second quarter (Q2) of 2025, building on a foundation of stable growth recorded in the first quarter, according to industry analysts. Despite ongoing challenges in cost management, the sector is projected to benefit from gradually improving job flows and the rollout of large-scale infrastructure projects.
Rakuten Trade Sdn Bhd equity research vice-president Thong Pak Leng noted that most construction firms delivered first-quarter earnings reflecting consistent progress across existing projects, supported by sound cost controls even amid a cautious economic backdrop. Among the standout performers was Sunway Construction Group Bhd (SunCon), which distinguished itself through robust execution, a healthy order book, and strong operational efficiency.
Looking ahead, Thong anticipates a gradual pick-up in job flows, driven by major infrastructure developments such as the RM17 billion Penang Light Rail Transit (LRT) project. While the project signals medium-term growth, he cautioned that material earnings impact is only expected from late 2025 or early 2026, as revenue recognition typically lags behind contract awards.
Another analyst echoed similar views, stating that most publicly listed construction firms either met or modestly exceeded expectations in Q1, though margin pressures persisted, largely due to elevated costs of materials and labour. SunCon continued to outperform with consistent project wins, while Gamuda Bhd benefited from its strategic overseas exposure, particularly in Australia and Taiwan, providing resilience against slower domestic contract flows.
The Penang LRT remains a key driver of medium-term sector visibility, with meaningful disbursements and contract rollouts anticipated from late 2025 onwards.
CIMB Securities Sdn Bhd reported that the construction sector as a whole turned in a stable set of results for Q1. Of the companies under its coverage, four met expectations, while IJM Corp Bhd delivered an outperformance. Importantly, none of the major listed players reported significant impairments or provisioning during the quarter.
CIMB maintained an “Overweight” rating on the construction sector and forecasted a 10 per cent year-on-year earnings growth for calendar year 2025. It also expects Q2 earnings to maintain upward momentum, supported by a return to full operational activity following festive season downtime in Q1.
The firm observed a strengthening in order book visibility as large-scale public infrastructure projects and hyperscale data centre developments come to market. It noted that up to six data centre contracts, each potentially worth RM2 billion, could be awarded over the next two to three quarters.
With the 13th Malaysia Plan expected to be tabled in July, the momentum in job flows is likely to accelerate. However, CIMB also flagged potential margin uncertainties stemming from the broadened scope of the Sales and Service Tax (SST), particularly in relation to smaller-scale, non-residential projects.
IJM Corp has been reinstated as one of CIMB’s top large-cap picks alongside Gamuda. IJM is currently in the final stages of converting RM6 billion to RM8 billion worth of project bids into firm contracts, having recently secured approval to proceed with the RM1.4 billion New Pantai Expressway extension.
Gamuda remains on course to reach its order book target of RM40 billion to RM45 billion by the end of 2025, underpinned by RM24 billion in high-conviction tenders, including six data centre-related bids.
For alpha picks, CIMB pointed to Malaysian Resources Corporation Bhd (MRCB), which has already secured RM5.6 billion in new contracts year-to-date. The firm sees potential upside to MRCB’s FY25 new order book target of RM6 billion, citing likely wins from the RM1 billion KL Sentral redevelopment and an active tender book valued at RM1.7 billion.
Among small-cap stocks, Econpile Holdings Bhd was highlighted for its potential to benefit from renewed momentum in large-scale piling works, as activity levels in the sector continue to recover.
-NST
