Strong start for construction sector in 1Q
PETALING JAYA: Analysts remain upbeat on the domestic construction industry, given the number of contracts that have been rolled out so far this year.
Hong Leong Investment Bank (HLIB) Research said in a report yesterday, that domestic contract awards to listed contractors totalled Rm6.96bil in the first quarter of this year (1Q24), which was up 45% quarter-on-quarter.
“Contracts during the quarter were off to a strong start, driven by private-sector jobs as public contracts contributed 15% of 1Q24 contract flows.
“On private-sector jobs, we note that flows came from commercial and residential development projects, while there were two contracts from the data centre space. On the flipside, public contracts in 1Q24 remained sluggish, coming in 3.8% lower year-on-year.”
HLIB Research said notable contract wins include construction of a shopping mall in Ipoh (Rm721mil) and data centre in Selangor (Rm747.8mil) for Sunway Construction Group Bhd, and construction of two blocks of apartments (Rm618.2mil) in Setapak for Southern Score Builders Bhd.
The research house added that there were several foreign contracts awarded in 1Q24 with multiple contracts in Saudi Arabia, United Arab Emirates and India worth Rm5.4bil for Eversendai Corp Bhd and construction of a gas hook-up system to Kelington Group Bhd worth Rm143mil.
Going forward, HLIB Research said it expects public infrastructure projects to drive contracts in the coming quarters, with sizable projects in the pipeline.
“For the remaining quarters of 2024, we look forward to the rollout of big-ticket infrastructure projects like the Penang LRT (more than Rm10bil), Pan Borneo Sabah Highway Phase 1B (Rm15.7bil), flood mitigation packages worth Rm11.8bil, Sabahsarawak Link Road (Rm7.4bil), LRT 3 reinstatement (Rm4.7bil), the Kuching Urban Transportation System-green Line, as well as water-scheme projects.
“There are also other basic infrastructure projects to come, funded by the high level of development expenditure of Rm90bil.”
HLIB Research said these projects should help drive contract flows in 2024, while the pipeline from industrial projects and data centres remains highly robust.
“Johor has been touted as the fastest growing data-centre market in South-east Asia. We anticipate further developments on the Johor LRT (Rm20bil) and Kuala Lumpur-singapore high-speed rail in the coming months.
“The former serves as a critical dispersal system to the incoming Johor Baru– Singapore Rapid Transit System that is expected to be operational by 2027.”