However, it also said that near-term construction job flows could be affected by the coming state elections while the highly anticipated MRT3 project continues to experience near-term delays.

“With six states gearing up for the elections, any impact to the pace of regulatory approvals may impede the progress of new projects, in particular projects (that have) yet to start physical construction,” said HLIB analyst Edwin Woo.

“Nevertheless, there are swing factors in the second half of the year, coming mainly from MRT3 and, to a lesser extent, airport expansion jobs (RM2-RM3 billion) and flood mitigation rollout (RM11 billion),” he added.

The construction sector displayed a relatively decent performance in the first half of 2023, largely due to the positive performance of Gamuda Bhd, whose share price has grown 16.4% year-to-date.

The sector registered RM7.2 billion worth of contract awards in the first quarter of 2023, with RM7.5 billion having already been recorded for the second quarter (at the time of writing).

“This was driven by foreign business developments, and the Madani government’s green light for the MRT3 project was a relief to the sector,” said Woo.

Other factors that contributed to the sector’s showing were lower cost pressure for materials, lower political noise post-general election, and greater interest towards domestic-oriented industries due to external weaknesses.

HLIB’s top picks for the sector remain unchanged, with “buy” calls on Gamuda and Sunway Construction Group Bhd, with respective target prices of RM4.92 and RM1.94.

“Both have contract win levers aside from the MRT3 project that could lead to a more sustained order book growth phase.

“Both companies are poised to sustain/enter earnings upcycle even on existing order books,” said Woo.

At market close today, Gamuda’s share price was flat at RM4.40, giving it a market capitalisation of RM11.71 billion. Sunway Construction’s share price was down one sen or 0.65% at RM1.54, valuing the company at RM1.99 billion.