KUALA LUMPUR: A debottlenecking of public projects by the new Finance Minister II (MOF2) and and a 45 per cent jump in private jobs are expected to see more than RM22 billion contracts awarded in 2024.
For 2023, domestic contracts recovered from the pandemic malaise increasing by 17 per cent driven by private sector projects.
Hong Leong Investment Bank (HLIB) reserach estimates that private jobs bounced back by 45 per cent with stronger rollout of jobs from commercial/residential developments, data centres and industrial type developments.
On the contrary, public contracts finished 2023 weaker by 14 per cent year-on-year (YoY) due to delays attributable to: (i) Budget -23 re-tabling and (ii) mid-year state elections. 70 per cent of public contracts by value came from JB-SG Rapid Transit System and Penang South Islands A projects.
"Infrastructure project rollouts were largely below expectations in 2023 as anticipated ones failed to materialise in part due to budget re-tabling and mid-year state elections."
" We reckon the recent appointment of MOF2 should start debottlenecking project pipeline while ongoing subsidy rationalisation will have an incremental effect of lifting fiscal space as potential savings are repurposed for infrastructure projects over the longer term," HLIB research said.
Datuk Seri Amir Hamzah Azizan was appointed MOF2 a month ago by Prime Minister Datuk Seri Anwar Ibrahim as part of a Cabinet reshuffle.
" Adding to the above, we see 2024 as an opportune time to start building –factoring in implementation time lags, the full scale of economic multiplier effects to be felt before the next General Election," HLIB research said in its note today.
Based on the 2024 Budget the government intends to rollout several big ticket projects like Pan Borneo Sabah Phase 1B (RM15.7 billion), flood mitigation packages worth RM11.8 billion, Penang Light Rapid Transit (LRT) (RM10billion), Sabah-Sarawak Link Road (RM7.4 billion) and LRT3 reinstatement (RM4.7 billion).
These projects form part of 2024's budgeted development expenditure of RM90 billion, which is 7.9 per cent higher YoY stripping of 1Malaysia Ddevelopment Bhd bond.
"We also expect further developments on civil packages for the Mass Rapid Transit (MRT) 3, which has had its tender validity extended to March 2024.
While there is potential for more news flow from other prospective projects like Kuala Lumpur-Singapore High Speed Rail (HSR) and Johor LRT (RM20 billion)," HLIB research said.
Tangible developments for Special Economic Zone and Special Financial Zone in Johor could also generate more construction opportunities, in particular for the Special Economic Zone given its greenfield status.
HLIB research has an "Overweight rating on the construction sector. Its top pick for the sector is Gamuda Bhd, with a target price for RM5.93 premised on attractive valuation and stronger tender positioning in upcoming infrastructure project rollout.