RHB Research: Malaysia’s construction sector is gearing up for revival

THE construction industry is poised for a rebound in tandem with a full sector reopening by October the soonest.

That will be further boosted by the Sept 27 roll-out of the 12th Malaysia Plan (12MP) and Budget 2022 (tentative: Oct 29) – alongside the Government’s goals to put the Malaysian economy back on track becoming clearer over the next 100 day – has prompted RHB Research to retain its “overweight” outlook on the sector.

“The increasing vaccination rate should further substantiate the reopening of more economic sectors, allowing overall business activities – including construction – to regain strength,” reckoned analysts Muhammad Danial Abd Razak and Eddy Do Wey Qing in a construction sector update.

Expecting construction activities to be fully ramped up in 2022, the research house is hopeful that productivity should improve in tandem with easing of movement restrictions.

“This should come with exciting developments on the reactivation of the Mass Rapid Transit Line 3 (MRT3) project,” opined RHB Research.

“We expect works to commence next year, benefiting contractors along the supply chain. The increase in productivity should also help contractors to improve their margins from a low base as they benefit from higher economies of scale.”

In this regard, companies have been guiding for better overall performances in 4Q 2021, given the Government has allowed industry capacity to go up to 100%.

“It recently set multi-tier conditions for construction companies to allow them to increase operational capacity from 60% previously,” noted the research house.

“This is only possible by getting more workers vaccinated. With vaccination rates reaching higher levels on a daily basis, it is likely that construction firms are able to inoculate at least 80% of their site workers by next month.”

RHB Research said it continues to advocate strong names like Gamuda Bhd and Kerjaya Prospek Group Bhd as both companies are supportive catalysts to buffer near-term risks and may come out of the pandemic stronger due to their supportive order books.

“Downside risks to our sector call are longer-than-expected delays in progress works, failure to secure new orders, and further delays in execution. This is in addition to the slower-than-expected progress in the immunisation rate under the National Recovery Plan (NRP),” added the research house. – Sept 9, 2021

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