MIDF Research said Gamuda won one of the main packages from Sungai Rasau water supply scheme, with a contract value of RM1.97bil.
PETALING JAYA: The Selangor state budget 2024, which has allocated RM1.2bil or 47% of the state’s total expenditure on development expenditure will fuel the infrastructure and construction sector.
According to MIDF Research, construction stocks will be the main beneficiaries of the state budget allocation.
Its top construction picks are Gamuda Bhd
and Malaysian Resources Corp Bhd (MRCB)
The research house, which has a “buy” call on Gamuda with a target price of RM5.38, said Gamuda won one of the main packages from Sungai Rasau water supply scheme, with a contract value of RM1.97bil.
As for MRCB, it will undertake the development of the Shah Alam sports complex with an aim to make it a vibrant and sustainable stadium, fitted with the latest technological features. MIDF Research has a “buy” call and a target price of 42 sen for MRCB.
The state government tabled an expansionary budget for 2024 on Nov 10, with a total allocation of RM2.53bil or 3.3% more than 2023.
Selangor’s construction, manufacturing and services sectors are the largest contributors to Malaysia’s economy.
Construction in the state will contribute 34.1% in 2022 compared with 30.1% in 2015, according to the research house.
The state’s operating expenditure is expected to increase by 6.4% to RM1.33bil for 2024 while revenue collection improved by 7.6% in 2023, higher by 20% of initial estimate.
However, the state income is forecast lower by 8.5% to RM2.2bil in 2024, it added.
“We view the state budget for 2024 as comprehensive and holistic, comprising of both economic growth and sustainable development. “The budget focuses on basic infrastructure including roads, bridges and water-related projects.
“Also, the government promotes environmental, social and governance practices among others, changing state official cars to electric vehicles starting next year and the installation of renewable energy infrastructure via Air Selangor to reduce carbon footprint,” MIDF Research added.
In terms of growth, MIDF Research said Selangor’s 2024 budget and Rancangan Selangor 1 (RS-1) may boost its gross domestic product (GDP) growth to above 4.5% next year.
The research house noted that the state government expects an average annual growth rate of 6.5% to 7% a year for the period of 2021 to 2025 under RS-1, higher than the forecast made under the 12th Malaysia Plan Mid-Term Review at 4.7% for 2023 to 2025 and 6.2% for 2021 to 2025.
“We are optimistic of the ability of the golden state of Selangor to expand beyond 4.5% in 2024.
“In addition, the RS-1 targets are crucial for the state as well as Malaysia due to the state’s economic size.
“The themes, strategies and targets will shape the new landscape for the state economy and are expected to have a potential impact to Malaysia’s macroeconomic performances and financial market,” MIDF Research added.
In terms of budget balance to GDP ratio, Selangor’s fiscal deficit is set to be at down 0.1% for 2024.
Selangor has been recording healthy fiscal conditions as the fiscal balance ratio hover between up 0.1% to down 0.2% since 2010.
The services sector supported more than 60% of the state economy since 2015, mainly due to the growing population growth and high-skilled employment contributing to the services sector.
Manufacturing is the second key sector in the state, sponsoring more than one-third of the economy while construction sectoral share stood at 4.7% and agriculture and mining sectors scored 1.3% and 0.2%, respectively, in 2022.
