HLIB upgrades construction sector to ‘overweight’ for 2024

KUALA LUMPUR: Hong Leong Investment Bank (HLIB) Bhd has upgraded its rating on the construction sector from “neutral” to “overweight” going into 2024 in anticipation of more large-ticket contracts to be announced next year.

In a note today, the bank said the projection will be driven by freeing public project pipeline bottlenecks; incremental fiscal space from subsidy reforms; and calmer politics.

“We see a potential for higher contract awards beyond the current levels of about RM20 billion.

“Based on Budget 2024, the government intends to roll out several big-ticket projects like Pan Borneo Sabah Phase 1B (RM15.7 billion), flood mitigation packages worth RM11.8 billion, Penang LRT (RM10 billion), Sabah-Sarawak Link Road (RM7.4 billion) and LRT3 reinstatement (RM4.7 billion),” it said.

HLIB noted that 2023 infrastructure project rollouts were largely below expectations as some failed to materialise, in part to the budget being re-tabled and mid-year state elections.

“We also expect further developments on civil packages for the MRT3 with tender validity extended to March 2024 while there is a potential for more news flow from other prospective projects like KL-Singapore High Speed Rail and RM20 billion Johor LRT.

“Tangible developments for Johor’s Special Economic Zone (SEZ) and Special Financial Zone could also generate more construction opportunities, in particular, the SEZ given its greenfield status,” it added.

According to the bank, the appointment of Finance Minister II should start debottlenecking the project pipeline, while the ongoing subsidy rationalisation will incrementally lift fiscal space with potential savings being repurposed for infrastructure projects over the longer term.

“We see 2024 as an opportune time to start building – factoring in implementation time lags – with the full scale of economic multiplier effects to be felt before the next general election,” HLIB said. – BERNAMA