Construction contracts are expected to reach 40 billion in the second half of the year. Analysts say the drama is yet to come

The construction sector has been successful in the first half of the year, with a total of RM26.36 billion. Analysts say the sector will take off in the second half of the year with the support of large-scale infrastructure projects, and it is predicted that it will receive more than RM40 billion in contracts, a record high since 2016.

Hong Leong Investment Bank Research released a report on Wednesday saying that the contract value obtained by the domestic construction sector in the first half of 2024 was astonishing, reaching RM20.738 billion, an increase of 41% over the previous year, almost comparable to the total contract value received by the sector in 2023 of RM21.8 billion.

Analysts pointed out that the main reason for the sharp increase in contract value so far this year is the increase in the number of contracts in the field. There were 97 contracts in the first half of the year alone, far higher than the 51 contracts in the same period last year.

“We found that the sector's contract value for the second quarter of this year was RM13.8 billion, which is our second-highest quarterly record for compiling the database since 2009, after 2016.”

The analyst added that this field can still achieve such excellent results without too many infrastructure projects during this period, which is undoubtedly a major achievement.

“We believe that the bullish sentiment among real estate developers and data center related contracts is the reason for the surge in construction contracts.”

Analysts said that in the second half of this year, in addition to data centers continuing to dominate contracts in the field, it is expected that this field will continue to improve with the support of launching large-scale public infrastructure projects.

“Simply put, the large-scale projects that were extended in the first half of the year will be the main axis leading the field 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 for ports, airports, water infrastructure, highways, and railways.

Meanwhile, the Johor-Singapore Special Economic Zone (JSSEZ) may also bring more opportunities to builders in the long term.

Furthermore, projects such as Longxin High Speed Rail (HSR), Johor Elevated Intelligent Rail Express (ART), and Rouxin Rapid Transit (RTS) may stimulate stronger industry sentiment.

Therefore, analysts believe that the contract value for the second half of the year in the proposed field is expected to record a contract value of more than RM40 billion, a record high in 8 years.

Supported by the data center and the Johor revitalization concept, it is believed that there is still room for investment in the construction sector. Analysts maintain the “gain” rating in the field. The preferred stocks are $GAMUDA(5398.MY)$with $SUNCON(5263.MY)$。