KUALA LUMPUR: RHB Investment Bank Bhd (RHB Research) believes the Malaysian construction stocks rally still has room to run, supported by continued record-breaking construction spending.
The Works Ministry has indicated that construction spending from both the public and private sectors could reach RM200 billion. In 2024, total project rollouts amounted to RM199 billion, the highest in eight years.
RHB Research said while the Bursa Malaysia Construction Index is currently trading above the 15-16 times price-to-earnings (P/Es) observed during the 2017 construction upcycle, it is not ripe for substantial profit-taking.
Government contract rollouts are likely to strengthen in 2025, supported by projects such as Penang Light Rail Transit (LRT), reinstatement of the five LRT 3 stations and Sarawak's Northern Coastal Highway.
RHB Investment Bank Bhd (RHB Research) said that water-related infrastructure is another key theme for this year as the Department of Irrigation and Drainage has approved 43 high-priority flood mitigation projects worth RM10.5 billion upon reviewing the latest developments.
A budget of RM2.5 billion has also been approved by the cabinet for the National Non-Revenue Water programme to begin from 2025 to 2030."
RHB Research also expects RM19.5 billion in potential jobs for contractors from the data centre infrastructure space.
"With the total value of projects awarded in 2024 at RM199 billion (the highest in eight years), we expect job flow trends to remain robust this year." "This is mainly premised on the Works Ministry's projection of construction spending to be worth RM200 billion in 2025 – with RM88 billion from the government's budget, RM32 billion estimated to be from projects by government-linked companies, and the remaining RM80 billion anticipated to come from the private sector," it said in a note.
RHB Research has an 'Overweight' call on the construction sector and favours Gamuda Bhd, Kerjaya Prospek Bhd and Sunway Construction Group Bhd.