Construction job flows expected to moderate


HLIB Research says domestic contract awards to listed contractors totalled some RM7.54bil in the second quarter, up 232% year-on-year.

PETALING JAYA: Job flows in the construction sector is poised to see a slowdown following an expected peak with the mass rapid transit three (MRT3) or MRT circle line project.

They are expected to be led by the private sector as had been the case in recent times.

According to Hong Leong Investment Bank (HLIB) Research, domestic construction job awards in the second quarter were driven by Gamuda Bhd’s reclamation contract for Silicon Island (Island A) that’s worth some RM3.47bil.

Domestic contract awards to listed contractors had totalled some RM7.54bil in the second quarter which is a 232% year-on-year jump, it said.

It noted that once these are excluded, job flows would have moderated by 44% compared to the previous quarter.

Maintaining its “neutral” call on the sector, HLIB Research said government-funded projects could see a sluggish pace in the third quarter on the slow passing of Budget 2023.

The upcoming state elections in six Peninsular states on Aug 12 may also affect this and is another reason for the cautiousness on this front.

“Nevertheless, there are swing factors in the second half coming mainly from the MRT3 anticipated in late-2023, to a lesser extent airport expansion jobs of RM2bil-RM3bil and flood mitigation jobs of around RM11bil,” it said.

The research house expects the construction sector’s performance to peak on MRT3 flows as it does not foresee mega projects awards in the near term.

With the market generally positioned for the long-awaited MRT3 catalyst, HLIB Research said there could be a possible sector correction once this is digested.

“The list of liquid stocks as proxies to the project are also limited,” it noted.

HLIB Research’s top picks in the sector are Gamuda Bhd and Sunway Construction Bhd and both stocks have been rated with “buy” calls.

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