KUALA LUMPUR (Jan 16): The construction sector is expected to see another decent year in 2025, after domestic contract awards hit a new record last year, according to Hong Leong Investment Bank (HLIB) Research.

As such, the house maintained its 'overweight' call on the sector, adding that valuations at current levels still provide room for upside.

"[We are] anticipating another year of sustained job flows anchored by conventional DCs and AI-DCs (artificial intelligence-driven data centres), infrastructure roll-outs, and buoyant private-sector sentiment," it said in a note on Thursday.

HLIB said total contracts awarded last year totalled RM44.2 billion, marking the highest sum since 2016 and reflecting a 103% year-on-year (y-o-y) increase.

This surge was attributed to accelerated progress in Corporate Green Power Programme projects, along with steady project flows supported by conventional and AI-powered data centres, said HLIB.

“The recent release of the interim final rule on AI hardware by the Biden administration could potentially dent the AI-DC pipeline (assuming that validated end-user status is granted),” the house added.

Despite this, HLIB remains optimistic that conventional DC pipelines will remain unaffected.

In the fourth quarter of 2024, domestic contract awards reached RM12.3 billion, a 156% increase y-o-y, fuelled by infrastructure projects and resurgent private-sector activity, particularly in Johor.

Contributing factors included strong property developer sentiment and a renewed focus on residential and commercial developments, the house noted.