HLIB Research expects a de-bottlenecking of public project pipeline while private jobs should sustain.
PETALING JAYA: The rollout of big-ticket jobs are expected to put the construction sector on a stronger footing this year.
Based on Budget 2024, the government intends to roll out several big-ticket projects.
These include the Pan Borneo Sabah Phase 1B worth RM15.7bil, flood mitigation packages (RM11.8bil), Penang light rail transit or LRT (RM10bil), Sabah-Sarawak Link Road (RM7.4bil) and LRT3 reinstatement (RM4.7bil).
These projects form part of 2024’s budgeted development expenditure (DE) of RM90bil, a 7.9% increase year-on-year (y-o-y) after stripping off the 1Malaysia Development Bhd bond.
Budget 2024 is Malaysia’s largest ever budget at RM393.8bil, which consists of an operating expenditure of RM303.8bil and DE of RM90bil.
Meanwhile, Hong Leong Investment Bank (HLIB) Research said it expects further developments on civil packages for the MRT3 (tender validity extended to March this year), while there is potential for more news flow from other prospective projects like the Kuala Lumpur–Singapore high-speed rail project, and Johor LRT (RM20bil).
“Tangible developments for the Special Economic Zone and Special Financial Zone in Johor could also generate more construction opportunities, in particular the former given its greenfield status,” the research house noted.
Infrastructure project rollouts were largely below expectations in 2023, as anticipated ones failed to materialise in part due to the budget re-tabling and mid-year state elections.
“We reckon the recent appointment of the Second Finance Minister should start debottlenecking the project pipeline, while ongoing subsidy rationalisation will have an incremental effect of lifting fiscal space as potential savings are repurposed for infrastructure projects over the longer term.
“Adding to the above, we see 2024 as an opportune time to start building – factoring in implementation time lags, the full scale of economic multiplier effects to be felt before the next general election,” HLIB Research said.
Going into 2024, the research house said it had previously upgraded the sector to “overweight” in anticipation of infrastructure project contract flows that could boost contract awards beyond current levels (of around RM22bil).
“As highlighted above, we are expecting a debottlenecking of the public project pipeline while private jobs should sustain.
“Amidst this prospect of an extended contract recovery upcycle, sector valuations are still undemanding, trading at price earnings and price-to-book multiples of 14.3 times and 0.9 times, respectively.
“Our sector top pick is Gamuda Bhd
, premised on attractive valuation and stronger tender positioning in upcoming infrastructure project rollout,” it added.
