Kuala Lumpur: Earnings in the construction sector are projected to continue their upward quarter-on-quarter trajectory in the second quarter of 2025, driven by increased construction site activities following the festive breaks in the first quarter of 2025.

According to BERNAMA News Agency, CIMB Securities Sdn Bhd reported that the visibility of order books is improving, supported by the gradual rollout of major public projects. Additionally, there is potential for the award of up to six large-scale data centre facilities, each estimated to be worth around RM2 billion, over the next two to three quarters.

The expanded sales and services tax (SST) scope, however, may pose near-term uncertainties regarding the margins of ongoing non-residential construction jobs of lower value. CIMB Securities noted that the sector is likely to experience minimal impact, as contractors are expected to pass on new tax charges under newly awarded construction contracts.

To address the issue of double taxation for existing construction projects, CIMB Securities mentioned that business-to-business exemptions are anticipated, ensuring SST levies are imposed at only one stage of the construction process.

For ongoing government-related contracts, contractors are not expected to face significant challenges in repricing their contracts to adjust for SST levies. However, the situation is less straightforward for existing non-residential private sector contracts, where approximately 40-50 percent of the total project cost could be subject to SST levies.