Nixon Wong, chief investment officer at Tradeview Capital.
PETALING JAYA: The construction sector’s outlook for the fourth quarter of 2024 (4Q24) is set to be bright, on the back of infra project builds as well as uptick in data centre projects.
The construction sector continues to show an uptrend in performance as records show a 22.9% increase in growth, reaching RM41.1bil, in 3Q24. This was a 20.2% improvement from the previous quarter of RM38.9bil.
Looking ahead, Tradeview Capital chief investment officer Nixon Wong Gok Hey said the sector is expected to remain healthy in 4Q24, driven by sustained domestic housing demand amid stable local interest rates.
Gradual rollouts on minor road and infra upgrade jobs may also further sustain growth of the sector, he told StarBiz.
Additionally, Wong is of the view that construction companies focusing on data centre builds could be one of the beneficiaries within the sector in 4Q24 as more foreign direct investments (FDIs) are announcing their focus on setting up data centres in Malaysia.“Residential contractors may also benefit as well from domestic affordability as bank loans approval rates are also improving at the same time,” he added.
Sharing the same view, MIDF Equity Research associate director Royce Tan Seng Hooi said ongoing infrastructure projects, as well as data centre projects will contribute to a stronger performance in 4Q24.
“As the construction of the Light Rail Transit 3 (LRT3) wraps up, we expect the ongoing infrastructure projects such as the Pan Borneo Highway, East Coast Rail Link and the Rapid Transit System Link, on top of the slew of data centre projects to contribute to the strong construction numbers in 4Q24.
“We can also expect the job awards this quarter to set the tone for next year, with projects such as the Penang LRT, Pan Borneo Phase 1B, Sarawak-Sabah Link Road Phase 2 and data centres,” he added.
MIDF Research said the construction sector is an obvious beneficiary of Budget 2025, despite the reduction in development expenditure (DE) to RM85bil. Nonetheless, Tan said the amount remains substantial for the sector.
“Despite the slightly lower DE, the amount remains substantial for the construction sector with the mentions of several crucial projects such as the widening of the North-South Expressway, expansion of Port Klang and expansion of the Penang International Airport, among others, which will aid in order book replenishments,” he said.
MIDF Research applauded the sector’s performance and said it signalled an improved economic landscape and robust business activities, especially among private players.
“Given the more robust growth in 3Q24, we anticipate that it will contribute an even greater share to Malaysia’s economic growth in 3Q24 – contributing 13.5% of gross domestic product (GDP) growth based on advance estimate, higher than 10.6% of GDP growth in 2Q24.
“We foresee Malaysia’s overall economic performance in 3Q24 could be more encouraging, underpinned by the ongoing expansion in construction activity, which has positive spillover and multiplier effects that will further stimulate broader economic growth,” MIDF Research added.
Gamuda Bhd
, IJM Corp Bhd and Malayan Cement Bhd are MIDF Research’s top picks for the sector.
The construction sector’s growth momentum was attributed to the expansion in the special trade activities sub-sector by 42.6%, of which has continued to demonstrate accelerated growth, said the Statistics Department.
“The residential buildings and non-residential buildings sub-sectors both gained momentum by expanding 27.8% and 27.7%, respectively. Meanwhile, the civil engineering sub-sector expanded at a more moderate pace, contributing positively with a 12% growth rate,” it added.
In terms of work done value, RM15.2bil or 36.9% was attributable to the civil engineering sub-sector, while non-residential buildings and residential buildings amounted to RM11.8bil and RM9.4bil, respectively.
Special trade activities made up about 11.6% in value, or RM4.8bil, largely in site preparation at RM1.3bil, electrical installations at RM1.2bil and plumbing, heating and air-conditioning installation activities at RM1bil.The private sector remained as the main impetus to the growth in this quarter, contributing to RM26.1bil or 63.5% of total value. In contrast, the public sector, with a 36.5% share valued at RM15bil, recorded a more moderate growth of 8.1%.
On the sectors’ performance by state, he said about 61.4% of the work done value was concentrated in Selangor, Johor, Kuala Lumpur and Sarawak.
