The investment bank has maintained an “overweight” rating on the sector in its update today.
In the near term, RHB IB said the federal government could redirect its attention towards initiating substantial infrastructure initiatives alongside introducing institutional changes.
“As such, we do not discount the possibility of any of the infrastructure projects making a debut in the fourth quarter of 2023 (Q4 2023) at the earliest,” it said.
RHB IB said the value of construction works done in Q2 2023 reached RM32.4 billion, up 8.1% year-on-year (y-o-y) from the same quarter last year.
During the same period, the construction sector’s economic output expanded by 6.2% y-o-y, marking the fifth consecutive quarter of y-o-y growth.
“The ample supply of labour, combined with receding material cost pressures, put contractors in a good position to not just ramp up the progress of their projects, but also be ready to accept new jobs that may boost earnings visibility,” it added.
The research house expressed a preference for Gamuda Bhd, Sunway Construction Group Bhd and Kerjaya Prospek Group Bhd, due to their strong earnings outlook, which is expected to span the next three to six years.
“Gamuda has a sizeable presence overseas — serving as a strategic hedge to any domestic weakness. Kerjaya Prospek has a framework arrangement with Samsung C&T, which would enable it to secure more private sophisticated jobs (backed by its net cash pile),” it said.
“We also favour Sunway Construction for its diverse tender book, which features a steady flow of internal jobs together with industrial infrastructure contracts, including the Song Hau 2 power plant project (pending financial close) in Vietnam, which will lift its order book by circa RM6 billion,” it added.
However, RHB IB warned of potential setbacks in the sector due to extended contract rollout delays and unexpected cost cuts linked to the Mass Rapid Transit 3 project.
As at 11.45am, Gamuda and Sunway Construction’s share prices were each down by one sen (0.23%) and three sen (1.56%) at RM4.41 and RM1.89. Both companies had a market capitalisation of RM11.89 billion and RM2.44 billion respectively.
Meanwhile, Kerjaya Prospek’s share price was unchanged at RM1.23, giving it a market capitalisation of RM1.56 billion.