KUALA LUMPUR, June 14 ― RHB Investment Bank Bhd (RHB IB) has reiterated its 'overweight' recommendation for the construction sector, driven by an increase in contract rollouts for both private and government projects.

In a research note today, RHB IB highlighted that contract rollouts have been notably active, with RM69.9 billion worth of construction projects awarded in the first five months of 2024 (5M 2024).

This represents a 37 per cent year-on-year increase from the RM50.9 billion recorded in 5M 2023.

Additionally, Deputy Works Minister Datuk Seri Ahmad Maslan estimated that 40 per cent of the RM90 billion development expenditure allocated under Budget 2024 would be disbursed by mid-year.

"We are encouraged by the continuous growth in private sector projects, particularly in the industrial space, data centres, and factories.

"The value of projects awarded in the non-residential property segment, which includes industrial properties reached RM52.2 billion in 5M 2024, surpassing half of the RM81 billion recorded in 2023,” it said.

The research firm identified the expedited rollout of mega projects, such as Mass Rapid Transit 3 (MRT3), as a major catalyst.

MRT3 is expected to commence towards the end of the first half of 2025 (1H 2025), with Mass Rapid Transit Corporation Sdn Bhd finalising land acquisitions by late 1H 2024.

Regarding the Kuala Lumpur-Singapore High Speed Rail (HSR), RHB IB anticipates announcements on the shortlisting of consortiums for the request for proposal stage by the end of the third quarter of 2024, pending government approval following evaluation by MyHSR Corporation Sdn Bhd.

"We advise investors to be selective, focusing on companies with strong credentials in local public infrastructure projects, substantial exposure to either overseas markets or private industrial jobs, and a lean balance sheet (net cash or manageable net gearing positions),” it added.

RHB IB underscored the importance of these attributes in mitigating potential downside risks, such as unexpected labour shortages, delays in public infrastructure project rollouts and increased volatility in building material costs. ― Bernama