KUALA LUMPUR: Despite a beleaguered construction jobs flow situation in the first half (1H) of 2022, caused by relentless inflationary pressure and labour shortage, Hong Leong Investment Bank Bhd (HLIB) continues to expect a recovery in flows this year.
HLIB said this would be mainly driven by the Mass Rapid Transit 3 (MRT3) rollout in December 2022.
"Based on industry checks, the three civil turnkey contracts could carry a total value of RM26 billion to RM28 billion.
"Civil tender briefings were held recently and factoring in the evaluation period, we think that December 2022 is a reasonable timeline, assuming no general election in between.
"Thereafter, we would expect a string of subcontract awards in the first quarter (Q1) 2023," it said in a note today.
HLIB said given that the minimum payment moratorium period was two years, contractors with better balance sheets were significantly advantaged in tenders.
"Prior to the aforementioned mega jobs, we would anticipate ECRL (East Coast Rail Link), Kuching Autonomous Rapid Transit and snippets from various highway projects including in East Malaysia.
"The Environmental Impact Assessment for the Penang South Reclamation project was also recently resubmitted in May but progress to be award ready could be further down the road," it added.
HLIB has retained its sector "Neutral" weight on two key reasons - soaring materials costs and possible event risk in 2H 2022.
"We continue to expect sector coverage earnings to recover this year but we flag rising concerns over the deteriorating labour shortage situation," it said.
HLIB said its preferred pick was Sunway Construction Group Bhd due to its strong balance sheet, extensive track record of infrastructure projects and strong support from parent company, Sunway Bhd.
"Around 20 per cent of its construction orderbook has built in cost escalation clause," it said.