"Construction sector to benefit from infra projects roll out in coming months"

"Construction sector to benefit from infra projects roll out in coming months"

KUALA LUMPUR: RHB Investment Bank Research (RHB IB Research)  maintains an overweight call on the construction sector as the conclusion of the state elections is expected to pave the way for the rollout of infrastructure projects in coming months.

The research unit said moving forward the federal government will likely be in a stronger position to focus its efforts in rolling out infrastructure programmes, and implementing its reform agenda. Therefore, it believes that government jobs flow could likely pick up in the coming months.

Some infrastructure projects that could see further development post state elections include the Mass Rapid Transit 3 (MRT3) project that is undergoing cost review, the Bayan Lepas Light Rail Transit (BLLRT), and the remaining phase of the Pan Borneo Highway, it said.

More importantly, the federal government's nationwide flood mitigation projects (initially targeted to begin in June) worth RM10.9 billion under a pre-qualified tender process could also see further development.

"Hence, we may see further upside in terms of the value of jobs awarded to contractors in the coming months.

The total value of construction jobs awarded in 7M23 reached RM59.4 billion (7M22: RM77.6 billion) according to data from the Construction Industry Development Board," it said in a note today.

State-funded projects such as the redevelopment of the Shah Alam Sports Complex may likely commence works in 4Q23.

The main developer for the project is Malaysian Resources Corp and the development works (estimated to be between RM700 million and RM1 billion) undertaken by the company may be satisfied via land swaps by the Selangor government.

As for the BLLRT, which may now be funded by the Federal Government, the incumbent Penang Government which maintained its position may facilitate smoother discussions with the federal government to roll out the BLLRT (target by year end).

RHB Investment Bank Research's top picks are Gamuda Bhd, Sunway Construction Group Bhd and Kerjaya Prospek Group given their steady job replenishment trend and strategic hedge against any downside risks from the domestic construction landscape amid their commendable exposure in overseas jobs (Gamuda) and also private industrial jobs (Sunway and Kerjaya Prospek). A key downside risk includes longer-than-expected delays in contract rollouts.

"The ongoing request for information exercise for the Kuala Lumpur-Singapore High Speed Rail or HSR may also help to lift sentiment on the sector," said the research house.

https://www.nst.com.my/business/2023/08/942660/construction-sector-benefit-infra-projects-roll-out-coming-months