New cycle of growth for building sector


PETALING JAYA: Construction companies are expecting a new cycle of growth for the industry, driven by a pick-up in domestic jobs and foreign direct investment (FDI).

Kerjaya Prospek Group Bhd chairman Datuk Tee Eng Ho said 2024 is anticipated to be a better year for construction players.

“Whilst expectations are of a positive nature, the business world operates under such a fluid and dynamic environment. It continuously faces one challenge after another, of various degrees, from pandemics, global uncertainties in the form of the ongoing Russia-Ukraine war to conflicts in the Red Sea.

“The latter has resulted in inflationary pressures on prices of goods and supplies in general. All these would have an impact on our operating cost come 2024, both directly and indirectly,” he said in the group’s annual report.

Tee added that Kerjaya Prospek remains mindful of the inflationary pressures exerted on prices, in particular the prices of building materials over the past few months.

“Prices of steel bars, cement and aggregates, the main lifeblood of the construction sector, have been exhibiting year-on-year growth rates of up to 10%.

“Kerjaya Prospek will unquestionably be kept busy, armed with an outstanding order book of over RM4bil and counting. However, with the escalating building material prices, this can derail our profitability growth path and erode our margins.”

With self-contentment taking a backseat, Tee said he is cautiously optimistic on the group’s tested and proven growth strategy.

He said the group’s strategy revolves around a “fire prevention approach rather than a firefighting one,” which will suffice in optimising earnings in 2024.

“This strategy has served us well previously,” he said.

Meanwhile, Sunway Construction Group Bhd (SunCon) chairman Datuk Goh Chye Koon noted that Malaysia is experiencing a surge in FDI, including in logistics warehouses and semiconductor manufacturing.

“The semiconductor industry is expected to recover in 2024 and industry players are expanding their capacity to meet the demand, which presents potential opportunities for SunCon.

“SunCon is actively exploring collaborations with new and existing joint-venture (JV) partners to expand our order book in these sectors,” he said in the company’s annual report.

Goh added that JVs would facilitate knowledge transfer that enables a swifter and more successful entry into these niche market segments, which involve new mechanical, electrical and plumbing engineering capabilities and services such as back-up and redundancies capabilities, cleanroom processes and more.”

In line with the government’s aim to make Malaysia the data centre hub in the Asian region, Goh highlighted that the (data centre) sector in Malaysia is undergoing substantial growth.

“It is expected that new and emerging investments of over 800-megawatt capacity will come on stream in phases over the next five years.

“This is due to lower land and energy costs, as well as supportive government policies.”

Additionally, Goh said Malaysia continues to remain a favoured alternative destination by multinational companies, as many choose to diversify their manufacturing bases away from China.

“Another facilitating factor is the establishment of the Green Lane pathway by Tenaga Nasional Bhd, which provides efficient and environmentally responsible solutions for data centre operators.”

Goh said the Green Lane pathway also streamlines the on-boarding process for data centres, expedites approvals and facilitates a smooth setup of data centre operations in Malaysia.

“SunCon is keen to develop our portfolio in this sector as we explore opportunities for long-term growth.

“Our present track record in data centre construction is advantageous when sourcing for opportunities in this fast-growing niche sector.”

Meanwhile, Malaysian Resources Corp Bhd (MRCB) in a statement in its annual report said it remains cautiously optimistic on the local construction sector.

“While high interest rates may dampen demand for private construction projects, the government’s continued focus on infrastructure development through initiatives like the Pan Borneo Highway and MRT3 projects is expected to provide ample opportunities for contractors.

“Malaysia’s public investment is set to rise 8.3% in 2024, driven by increased government spending on social and economic sectors, including ongoing infrastructure projects like highways, railroads and transit systems.”

Additionally, MRCB said major new projects like flood mitigation and industrial park expansions will boost this growth further.

Meanwhile, RHB Investment Bank said the slew of developments in terms of new data centres (especially with capacities over 40 megawatts) in the country, is expected to strengthen job flows.

“We view such news flows to be a testament to Malaysia’s vibrant market for data centres, which – in turn – benefits the construction sector in terms of providing job replenishment opportunities.

“Contractors with certain niches, such as industrialised building systems (IBS) capabilities, are set to benefit from the data centre growth prospects in the longer run,” it said in a recent report.

With more contractors venturing into the data centre construction market, RHB said players should develop their own respective niche in the data centre supply chain.

The research house noted that Gamuda Bhd is positioning itself as an efficient data centre builder via its IBS expertise.

Top picks for the data centre construction play include Gamuda and SunCon, which have secured a total of at least RM2bil worth of data centre contracts.

“A notable mention would be IJM Corp Bhd, which has been involved in providing industrial piles for data centres and has a contract under its tender book.”

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Kerjaya Prospek , SunCon , construction , MRCB

   

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