Upbeat outlook on construction industry

PETALING JAYA: MIDF Research is maintaining its positive outlook on the construction industry, underpinned by the strong pipeline of jobs that can be expected going forward, both in the civil and private segments.

In a note to clients yesterday, the research house is anticipating the second half of 2024 (2H24) to be driven by stronger job flows with the expected implementation of government projects.

“This would be in line with the allocation under Budget 2024, which had set aside RM90bil for development expenditure,” it said.

Quoting Deputy Works Minister Datuk Seri Ahmad Maslan, it reported that about 40%, or RM36bil, of the allotted development expenditure is expected to be rolled out by mid-2024, with about RM180bil worth of jobs in the pipeline, divided roughly equally between the budget allocation and the private sector.

Additionally, MIDF Research said Ahmad Maslan has revealed that RM36bil of projects which may potentially be rolled out are related to the construction of schools, hospitals, clinics and roads.

“He (Ahmad Maslan) further explained that all projects will go through the open tender process or selective pre-qualification for the open tender process and that there are no more direct negotiations.

“Decision makers for projects under RM100mil are the tender committees for respective ministries while projects between RM100mil and RM300mil will be decided by the Second Finance Minister.

“For projects above RM300mil, these will be decided by the Finance Minister, who is also the Prime Minister,” the research firm said.

At the same time, the securities firm confirmed that the evaluation process is ongoing for the remaining 15 packages under Phase 1B of the Pan Borneo Sabah highway project, which saw the participation of more than 300 companies.

It said these remaining packages are valued at more than RM10bil, with the Works Ministry looking to finalise the second stage of procurement, expectedly by July this year.

Other developments that kept MIDF Research bullish on the sector for 2H24 are the KL Sentral redevelopment job, slated to cost over RM1bil and will be undertaken by Malaysian Resouces Corp Bhd (MRCB), as well as the construction of the Mutiara Light Rail Transit (LRT) line, which should commence by the fourth quarter and targetedfor completion in 2030.

It is noted that SRS Consortium Sdn Bhd, a 60% subsidiary of Gamuda Bhd, will be spearheading the Segment 1 construction of the Mutiara LRT project, which is expected to be a 23.5km line from the upcoming Silicon Island to Komtar, estimated to cost RM8.23bil.

On the Mass Rapid Transit (MRT) 3, the securities firm acknowledged optimistic expectations that could see the tenders being awarded by end-2024, although it did not discount further delays, subject to the land acquisition process.

“The finalisation of land lots to be acquired is expected to happen in 3Q24 and the acquisition process to take place in 4Q24. Notices to vacate the acquired lands are expected to be issued from 1Q25, where landowners will be given up to six months to vacate,” it said.

It said the construction sector has been among the best performer year-to-date, bringing the Bursa Construction Index up by 18.2%, before revealing its top picks list which include Gamuda, IJM Corp Bhd and Malayan Cement Bhd, with target prices of RM5.98, RM2.57 and RM5.33, respectively.

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