KUALA LUMPUR: The construction sector is expected to see sizable public infrastructure projects coming to the fore in the second half of 2024 (2H24), according to Hong Leong Investment Bank Bhd (HLIB).
Several projects to be rolled out in the near term include Penang LRT (RM10 billion), Pan-Borneo Highway (PBH) Sabah Phase 1B (RM14 billion), Sabah-Sarawak Link Road Phase 2 (RM7.4 billion), Northern Coastal Sarawak Road, Sabah hydro and water, Penang airport expansion, and critical flood mitigation projects.
In short, HLIB is expecting the rollout of DE and off-balance sheet-funded projects in the 2H after delays in the 1H, which come part and parcel with government projects.
"We believe the wave of investments into the country will continue to encourage development spending on critical enabling infrastructure like ports and airports, water infrastructure, highways, and railways," it said in a note.
HLIB reckons the upcoming Johor-Singapore special economic zone (JS-SEZ) could spell more opportunities on this front over the longer term.
Meanwhile, the bank said potential developments on prospective projects like Kuala Lumpur-Singapore high-speed rail (KL-SG HSR) and Johor Automated Rapid Transit (ART) could spur stronger sector sentiment.
"We view the latter as a critical and urgent dispersal system considering the Johor Bahru-Singapore Rapid Transit System (RTS) will be up for completion in 2026 (projected first-year daily ridership at 40,000) and increasing economic linkages will only amplify the need for high-capacity connectivity infrastructure to complement the RTS link," it said.
Overall, HLIB retained its overweight sector call in 2H24, anticipating the rollout of big-ticket infrastructural contracts.
The bank said this should lead to an acceleration of contract awards into the 2H, possibly leading to the second-highest contract award tally of more than RM40 billion.
"Further to this, we expect to sustain the private sector flows to be led by DCs where the pipeline continues to be strong.
"Positive sector sentiment could also come from JB-SG SEZ finalisation and Budget 2025," it said.
The firm's top picks remain unchanged with a buy call on Gamuda Bhd (target price: RM9.08) and Sunway Construction Bhd (target price: RM5.60).