Data centres to boost construction jobs in 2H25
Hong Leong Investment Bank (HLIB) Research said the DC award cycle in 2H25 follows multiple award decisions for DC tenders made in 1H25, including five multibillion ringgit tenders for one US-based hyperscaler.
'For the DC segment, we take a 'big is better'' view, anticipating further inroads to be made by sector's big-three players (namely Gamuda Bhd , Sunway Construction Group Bhd and IJM Corp Bhd ), riding on competitive advantages such as balance sheet strength, track record and the ability to leverage their integrated structures, including access to building material supply chains and bundled offerings in power and water infrastructure,' HLIB Research said in a report.
While concerns have arisen from reports of potential artificial intelligence (AI) chip export curbs on Malaysia, these remain unconfirmed and lack actionable details.
HLIB Research added that Malaysian contractors' reliance on US and Western hyperscalers for large DC projects somewhat mitigates these uncertainties, with exemptions possible – this remains their base case. Year-to-date contracts awarded have totalled RM28.9bil, marking a 39.5% year-on-year (y-o-y) growth.
'In 1H25, total DC-related contracts awarded came in at RM3.3bil (31% y-o-y fall), a slower pace when compared to the frenetic pace achieved in 1H24,' it said.
Beyond DC projects, HLIB Research said 2H25 could see subcontract and system package awards for the Penang light rail transit, as well as progress on major Sabah and Sarawak road projects such as the Sabah–Sarawak Link Road.
As for the commercial segment, including residential projects built on commercial land, HLIB Research said uncertainty over the sales and service tax (SST) treatment could weigh on activity in the third quarter of 2025. Developers may delay project launches until there is clarity on how SST will be applied to such developments.
HLIB Research said the recent removal of the SST exemption for the construction sector, from 0% to 6%, should be manageable overall as most contracts allow for cost adjustments.
'We retain our 'overweight' sector call, anticipating sustained contract flows in 2H25 anchored by DCs, infrastructure rollout and still buoyant private sector sentiment. In our view, contractors broadly can still add to order books from the DC segment as well as infrastructure projects.'
HLIB Research said forward sector valuations remains palatable, trading at price-to-earning and price-to-book multiples of 19.1 times and 1.3 times, respectively.
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