13MP to set stage for construction boost in 2026 Budget
It said the plan's RM430 billion in development spending, or RM86 billion a year, could trigger major infrastructure projects before the next general election in February 2028.
While federal budgets have typically been a non-event for the construction sector, CGS International expects the Oct 25 Budget 2026 to be different.
"In our view, the 2026 Budget will be the platform for the Prime Minister to set the tone for the rollout of key infrastructure projects prior to the next general elections which must be called by Feb 2028.
"Hence, we expect his tone to change from the 2025 Budget where he said, "now is not the time to roll out mega projects"," it said in a note.
CGS International believes that the firm's conviction is validated by the unwinding of subsidies and implementation of the Sales and Service Tax, giving the government additional revenues.
"Also, we think the government realises construction has a strong multiplier effect given its strong correlation with gross domestic product growth," it said.
Meanwhile, CGS International expects data centre (DC) awards to accelerate in the second half of 2025 (2H25) and calendar year 2026 .
The firm gathered there are five DC tenders for Pearl Computing which will be awarded from third quarter (Q3) of 2025 and including the Negri Sembilan land, the number of tenders could rise to at least 13.
"In the building material space like cement, there is also further evidence that the DC rollout has picked up steam with strong growth and margin expansion for MCement's ready mixed concrete division.
"We believe the upside for DCs will come from the series of land purchases by Microsoft in 2023 and 2024 in Johor, as the tenders have yet to open," it said.
For the next six months, CGS International believes investors should focus on visibility of contract awards and headline newsflow, and to a lesser extent on earnings delivery.
In addition, the firm has maintained Overweight on the sector with its top picks including Gamuda Bhd, IJM Corp Bhd and Malayan Cement Bhd.
"However, the downside risks include stiff competition in the DC space, higher foreign worker levy and material costs.
"Re-rating catalysts are faster project rollouts and increased foreign direct investment," it added.
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