TA Research said the construction of the Mass Rapid Transit Line 3 and data centres, as well as investments in the semiconductor industry, will be key drivers and catalysts for the construction industry.
PETALING JAYA: The construction sector is expected to continue thriving as robust order books provide strong visibility for builders for the coming two to three years, says TA Research.
TA Research stated in its market outlook report for the second half of 2024 (2H24) that the property sector’s revitalisation has driven an upward spike in the construction sector’s activity as developers ramped up new launches, resulting in more projects going into order books.
Compared with the first half of 2024 (1H24), the research house noted that the share prices of builders have experienced substantial positive momentum, year-to-date.
“This bullish sentiment is largely driven by a revitalised property sector and the potential rollout of large-scale infrastructure projects.
“Furthermore, the share price rally has also been fuelled by growth in the data-centre construction market, which offers higher project value with shorter construction durations.”
Moving forward, TA Research said the construction of the Mass Rapid Transit Line 3 (MRT3) and data centres, as well as investments in the semiconductor industry, will be key drivers and catalysts for the construction industry.
The research house said it expects tender results for the MRT3 project to be announced soon, following the expiration of the tender validity at the end of March 2024.
“Given its superior viability compared with the Kuala Lumpur-Singapore High Speed Rail (KL-SG HSR) project, it is possible that the MRT3 project, which is estimated to cost RM31bil, will be awarded in 2H24,” the research house added.
Meanwhile, commenting on the status of the KL-SG HSR, TA Research said: “We anticipate that an announcement regarding the status of the HSR rollout will be issued in 2H24”.
Transport Minister Anthony Loke had said earlier that the project requires Cabinet approval before proceeding to discussions with Singapore authorities.
The Cabinet’s approval is estimated to take at least four to six months, during which time efforts will be made to continue identifying a viable financing solution for the HSR project.
TA Research also said that construction players are expected to be direct beneficiaries of the establishment of new data centres in Malaysia, which is forecast to have a gross investment value of more than RM14bil over the next five years.
The government’s incentives are likely to continue attracting foreign investors to establish more data centres in the country, resulting in many job opportunities and a positive economic impact for Malaysia.
“This development will significantly elevate the construction landscape, as building data centres involves a higher degree of complexity compared with other industrial projects.
“Consequently, we anticipate an increase in data centre project awards over the next six months, benefitting domestic construction players such as Gamuda Bhd
, Sunway Construction Group Bhd (SunCon) and IJM Corp Bhd.”
Meanwhile, the allocation of RM25bil in fiscal support through targeted incentives, aligned with the National Semiconductor Strategy (NSS), is expected to significantly increase demand for constructions of complex industrial properties.
TA Research maintained an “overweight” call on the construction sector, with Gamuda, SunCon and Inta Bina Group Bhd being its top picks.
