Periodic/Sector reports
Construction - 2Q26 Results Wrap-up: Largely Positive; DC Still Charging Growth
OVERWEIGHT (Maintained)
Analyst
Analyst
Highlights
- The sector’s 2Q26 earnings charted commendable earnings growth (+3% yoy, +6% qoq).
- MIDA’s statistics shown that approvals for DC and cloud-computing projects remained strong in 1H26, while around RM9b of DC contracts have been secured by companies under our coverage in 2H26 thus far.
- Maintain OVERWEIGHT; top picks are Gamuda, IJM, Binastra and Kerjaya.
Analysis
- 2Q26 results round-up showing decent growth, largely within expectations. Under our coverage, Gamuda, Sunway Construction (Suncon), Kerjaya Prospek, WCT and Binastra’s results were within expectations. Meanwhile, IJM Corporation (IJM) beat expectations while Malaysian Resources Corporation (MRCB) underperformed. Overall, the sector charted decent earnings growth (+3% yoy, +6% qoq), as most of the companies continued to register better earnings yoy on the back of: a) accelerated progress billings, particularly from data centres (DC), b) improved profit margins, and c) robust orderbooks on hand due to sustained ytd job flows.
- Potential re-activation of VOP may alleviate rising cost pressure. In Aug 26, the Deputy Works Minister said that the government does not rule out the possibility of reactivating the Variation of Price (VOP) clause if there is strong evidence showing a sudden increase in construction material prices. The VOP will allow the government to partially cover increases in materials costs until the applicable government-related projects are completed. Nevertheless, we are of the view that building material prices have remained largely stable despite being slightly elevated ytd, and smaller contractors with infrastructure-focused orderbooks may have to absorb the margin compression over 2H26 results.
- MIDA’s statistics revealed robust approvals for DC and cloud-computing projects in 1H26. Based on the Malaysian Investment Authority (MIDA), DC and cloud-computing projects attracted RM95.8b/44% investments out of 1H26’s overall approved investment of RM218.5b (+12% yoy). As of end-2Q26, Malaysia’s total electricity demand for DC had reached 8,350 MW for 61 DC projects. 42 of these projects are completed (5,650 MW). Meanwhile, total electricity demand for uncompleted projects is around 2,700MW (19 projects). Such robust DC investments will continue to support orderbook opportunities for local contractors with DC exposure, anchoring a multi-year earnings upcycle.
Highlights
- The sector’s 2Q26 earnings charted commendable earnings growth (+3% yoy, +6% qoq).
- MIDA’s statistics shown that approvals for DC and cloud-computing projects remained strong in 1H26, while around RM9b of DC contracts have been secured by companies under our coverage in 2H26 thus far.
- Maintain OVERWEIGHT; top picks are Gamuda, IJM, Binastra and Kerjaya.
Analysis
- 2Q26 results round-up showing decent growth, largely within expectations. Under our coverage, Gamuda, Sunway Construction (Suncon), Kerjaya Prospek, WCT and Binastra’s results were within expectations. Meanwhile, IJM Corporation (IJM) beat expectations while Malaysian Resources Corporation (MRCB) underperformed. Overall, the sector charted decent earnings growth (+3% yoy, +6% qoq), as most of the companies continued to register better earnings yoy on the back of: a) accelerated progress billings, particularly from data centres (DC), b) improved profit margins, and c) robust orderbooks on hand due to sustained ytd job flows.
- Potential re-activation of VOP may alleviate rising cost pressure. In Aug 26, the Deputy Works Minister said that the government does not rule out the possibility of reactivating the Variation of Price (VOP) clause if there is strong evidence showing a sudden increase in construction material prices. The VOP will allow the government to partially cover increases in materials costs until the applicable government-related projects are completed. Nevertheless, we are of the view that building material prices have remained largely stable despite being slightly elevated ytd, and smaller contractors with infrastructure-focused orderbooks may have to absorb the margin compression over 2H26 results.
- MIDA’s statistics revealed robust approvals for DC and cloud-computing projects in 1H26. Based on the Malaysian Investment Authority (MIDA), DC and cloud-computing projects attracted RM95.8b/44% investments out of 1H26’s overall approved investment of RM218.5b (+12% yoy). As of end-2Q26, Malaysia’s total electricity demand for DC had reached 8,350 MW for 61 DC projects. 42 of these projects are completed (5,650 MW). Meanwhile, total electricity demand for uncompleted projects is around 2,700MW (19 projects). Such robust DC investments will continue to support orderbook opportunities for local contractors with DC exposure, anchoring a multi-year earnings upcycle.
OVERWEIGHT (Maintained)
Analyst
Analyst
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