Construction contracts in the second half of the year are expected to reach 40 billion, analysts say the best is yet to come.

In the first half of the year, the construction sector has repeatedly achieved success, with a total of 26.36 billion ringgit of contracts secured. Analysts predict that in the second half of the year, supported by large-scale infrastructure projects, the sector will soar and is expected to secure contracts exceeding 40 billion ringgit, setting a new high since 2016.

Fung Lum Investment Bank's report released on Wednesday states that the astonishing value of contracts secured in the domestic construction sector in the first half of 2024 reached a high of 20.738 billion ringgit, a 41% year-on-year increase, almost matching the total contract value of 21.8 billion ringgit received by the sector in 2023.

Analysts point out that the main reason for the significant increase in contract value so far this year is the increase in the number of sector contracts, with 97 contracts in just the first half of the year, far surpassing the 51 contracts in the same period last year.

"We found that the contract value for the sector this quarter is 13.8 billion ringgit, marking the second-highest quarterly record we have compiled since 2009, only second to 2016."

Analysts further explain that despite the lack of significant infrastructure projects driving the sector during this period, achieving such outstanding results is undoubtedly a great achievement.

"We believe that the property developers' sentiment is bullish, along with the contracts related to data centers driving the significant increase in construction contracts."

Analysts say that in the second half of this year, in addition to data centers continuing to dominate contract areas, it is expected that supported by the launch of large-scale public infrastructure projects, this sector will still develop positively.

"In short, the large projects postponed in the first half of the year are believed to be the main axis leading the development in the second half of the year."

Analysts believe that the investment wave in the second half of the year will continue to focus on expenses related to ports, airports, water conservancy infrastructure, highways, and railroads, among other facilities.

Furthermore, the Johor–Singapore Economic Zone (JSSEZ) may bring more opportunities to construction firms in the long term.

Moreover, projects such as the Johor-Singapore High-Speed Rail (HSR), the Johor Elevated Asia Vets Transit (ART), and the Johor New SBS Transit (RTS) may fuel stronger industry sentiment.

Therefore, analysts believe that the contract value in the sector in the second half of the year is expected to reach over 40 billion ringgit, setting a new high in 8 years.

With the support of data centers and the revitalization concept of Johor, it is believed that there is still investment space in the construction sector. Analysts maintain a "shareholding" rating for the sector, with the preferred stocks being $GAMUDA (5398.MY)$和 $SUNCON (5263.MY)$。