According to Hong Leong Investment Bank (HLIB) Research, the Malaysian construction sector is poised for a significant upturn in 2024. This is due to an array of large-scale infrastructure projects, which are part of the government’s budgeted development expenditure of RM90 billion.
This reflects a robust 7.9% year-on-year increase, setting a bullish tone for the industry, particularly after the exclusion of the 1MDB bond from the calculations. Key projects that are expected to drive this growth include the Pan Borneo Sabah Phase 1B, extensive flood mitigation works, the Penang LRT, the Sabah-Sarawak Link Road, and the LRT3 reinstatement.
These ambitious projects are not only anticipated to bolster the construction sector’s contract awards but also to underpin a more sustained orderbook growth phase, especially for top industry players like Gamuda Bhd and Sunway Construction Bhd. The MRT3 project, with its tender validity extended to March 2024, also adds to the optimistic outlook, alongside the potential kick-off of other infrastructural ventures such as the KL-SG HSR and the Johor LRT.
The Special Economic Zone and Special Financial Zone in Johor are particularly noteworthy due to their ‘greenfield’ status, says HLIB – suggesting that these regions are untapped and may offer fresh construction opportunities.
Further support for the sector’s growth comes from the government’s focus on fiscal space expansion through subsidy rationalisation, potentially freeing up more funds for infrastructure development. The finance sector’s debottlenecking efforts and the expected increase in water sector capex, driven by tariff hikes, also contribute positively to the construction sector’s prospects.
Cost pressures that have been a concern in recent times appear to be easing, with most input costs expected to remain stable. However, there could be some impact from the gradual implementation of fuel subsidy rationalisation.
