PETALING JAYA: RHB Research believes trading momentum among construction counters will remain strong in the coming quarters, backed by several key developments in the country.
The key developments include the Mass Rapid Transit 3 project, which is in the land acquisition process, while the Kuala Lumpur-Singapore High Speed Rail (HSR) project has seen submission of concept proposals in January.
There is also the expected completion of the study on Johor’s proposal for an elevated Autonomous Rapid Transit system by August.
The research house noted that the Bursa Malaysia Construction Index (BMCI) is trading at a forward price earnings (P/E) multiple of 19 times to 20 times, above the 16 times seen during the 2017 construction upcycle.
“We believe there is still room for upside for the BMCI, premised on the prevalence of industrial jobs (including data centres) which were absent during the 2017 upcycle,” it said.
RHB Research anticipated news flow on infrastructure, industrial, or data centre wins could push the BMCI index higher than the current forward P/E of 19 to 20 times.
Its top picks are Gamuda Bhd
, Kerjaya Prospek Group Bhd and Sunway Construction Group Bhd (SunCon) due to their commendable earnings visibility over the next two years.
“Gamuda has a sizeable presence overseas, while maintaining its relevance domestically.
“Kerjaya Prospek and SunCon do not only have steady pipelines from related-party transactions, but also ongoing industrial jobs,” the research house added.
Overall, RHB Research said contract rollouts have been steady, with RM89bil worth of projects awarded to contractors in the first half of the year, which was more than half of the value seen in 2023 of RM146.5bil.
Out of the total contracts awarded, some RM67bil was from the private sector while the remaining from the government
“We think the diesel subsidy rationalisation will give the government more fiscal headroom to roll out projects,” the research house said.
In Sabah, Phase 1B of Pan Borneo Highway worth RM15.7bil has seen four out of 19 packages awarded, with the remaining ones in the final evaluation stages of the open pre-qualification tender before likely being issued in the third quarter of this year.
Meanwhile, the Sarawak-Sabah Link Road Phase 2 worth some RM7bil saw the Maltimur Resources Sdn Bhd and Aktif Unggul Sdn Bhd joint venture appointed as the main contractor in March, with subcontractor packages to be awarded next.
