Contractors in for stronger growth momentum
Jobs worth Rm180bil to be awarded by government and private sector in 2H24
PETALING JAYA: The local construction sector will be injected with more projects in the second half of this year (2H24) as up to Rm180bil worth of jobs from the government and private sector are being dished out.
Deputy Works Minister Datuk Seri Ahmad Maslan said a total allocation of Rm180bil in the sector has been up for grabs since the start of this year but the award of such contracts has been rather slow, with momentum expected to pick up in 2H24.
He added that many tenders and letters of acceptance will also be given out in the middle of the year.
“There will only be two types of tenders issued, namely open tenders with pre-qualifications and selective tenders. There is no direct negotiation for tenders now,” he said during the MIDF Luncheon Talk: Awaiting Take-off of Construction Sector yesterday.
Ahmad Maslan said the Rm90bil allocated for development expenditure in Budget 2024 is the amount given to the construction sector, with the private sector contributing another Rm90bil to the industry.
“I cannot estimate the tender value that the private sector will issue but I estimate 40% of the Rm90bil allocation by the government will be given out in the middle of this year. The projects to be tendered out are school, hospital, clinic and road projects,” he said.
Ahmad Maslan said the construction industry continues to maintain its positive momentum for seven consecutive quarters, posting a 6.8% growth year-on-year, reaching a total value of work done of Rm34.1bil in the fourth quarter of 2023 (4Q23).
“The most recent data from Construction Industry Development Board (CIDB) underscores the industry’s vitality, with 2,772 projects awarded in 1Q24, totalling Rm31.34bil.
“While slightly below the figures of the previous year, this statistic presents promising and favourable opportunities for industry stakeholders,” he said.
“There will only be two types of tenders issued, namely open tenders with pre-qualifications and selective tenders. There is no direct negotiation for tenders now.” Datuk Seri Ahmad Maslan
Meanwhile, Ahmad Maslan said the change in leadership was one of the factors that led to the delay in the implementation of 33 flood mitigation projects set out in Budget 2024.
According to Rakuten Trade head of equity sales Vincent Lau, the construction sector holds a promising outlook this year, with projects such as data centres and high-rise condominiums awarded.
“Additionally, data centres have become a notable sector with increasing demand, adding to the positive outlook of the industry.
“The rollout of larger infrastructure projects like the Penang Light Rail Transit (LRT), Mass Rapid Transit 3 and Pan Borneo Highway have been forthcoming, with many still anticipating for more contracts to be issued,” he told Starbiz.
Lau said the primary drivers for the private sector within the construction industry are residential projects, particularly high-rise condominium developments.
“Many construction contracts worth hundreds of millions are being awarded regularly in the private sector of the industry, including projects in data centre and residential developments like housing and condominiums.
“This activity is a positive indicator, demonstrating a promising start to the sector’s performance,” he said.
Lau said the stocks poised to benefit from the bullish momentum in the construction sector are big players like Gamuda Bhd, Sunway Construction Group Bhd and IJM Corp Bhd.
“Not only the construction players but also companies involved in building materials and those catering to data centres for the mechanical and electrical (M&E) services are also doing well.
“The spillover effect is quite massive as the construction sector also includes data centres, with M&E service providers stand to benefit,” he added.
RHB Investment Bank analyst Adam Mohamed Rahim said the main drivers for the private sector would be skewed towards non-residential segments such as industrial building jobs, particularly data centre construction in Johor and Klang Valley, and warehouses and factories.
“Our optimism on the non-residential segment, particularly industrial, is premised on the number of new planned supply under the industrial property sub-sector, which surged to 1,372 units versus the previous five years, which only hovered below 900 units.
“We view semiconductor facilities and data centres to underpin the growth in industrial properties, backed by robust trends by investors, with the country recording the highest ever approved investments of Rm329.5bil in 2023, up 23% from 2022,” he told Starbiz.
Overall, the construction sector is poised for further order book expansion as the federal government continues undertaking pump priming initiatives, for example highway projects in Borneo and Penang LRT, said Adam.
“According to data from the CIDB, the total value of construction projects awarded stood at Rm30.8bil in 1Q24 compared with Rm31.3bil in 1Q23.
“This value has yet to take into account the contract for the three segments of Pulau Pinang LRT Mutiara Line, which may be more than Rm10.5bil, pending negotiations between SRS Consortium and MRT Corp for Segment 1, while tenders for Segment 2 and 3 have yet to be out,” he added.