The Undervalued Construction Stock that Leverages on Johor Construction Opportunities

Haily Group Berhad (0237), a key player in Malaysia’s construction industry, is making strides with its focus on the southern region, particularly in Johor. As the state continues to benefit from strategic developments, including the Johor-Singapore Special Economic Zone (JS-SEZ) and the Rapid Transit System (RTS) between Johor Bahru and Singapore, Haily is well-positioned to capitalize on the growing demand for infrastructure, residential, and commercial projects.

Statistically, Malaysia’s economy is expected to remain robust, with GDP growth forecasted between 4.0% and 5.0% for 2024. The second quarter of 2024 already saw a 5.9% growth, providing a solid backdrop for construction companies like Haily Group. In tandem with the strong growth of the economy, World Bank has also revised its forecast for Malaysia’s 2024 growth from 4.3% to a higher 4.9%.

Additionally, the construction sector is thriving, with the value of construction work done rising by 20.2% in Q2 2024, reaching RM38.9 billion. This increase has been driven largely by civil engineering projects and residential building developments, which are Haily Group’s key focus areas.

As a southern region-based builder, Haily Group has a robust order book of 26 ongoing projects, valued at approximately RM857.93 million. This solid pipeline underscores Haily’s strategic approach to expanding its footprint in Johor’s growing property development sector. The company’s ongoing projects span residential and commercial developments, reflecting the rising demand in the state.

Most notably, Haily Group had secured a total of 13 contracts with the contract value of approximately RM462.31 million in 2024 up to the date of writing, which far surpasses the RM272.14 million achieved in 2023.

Johor’s development landscape is evolving rapidly, with the JS-SEZ aiming to boost economic ties between Johor and Singapore, which is expected to drive more commercial and residential demand.

Moreover, the RTS project, slated for completion by early 2027, is anticipated to further enhance connectivity, stimulate economic activity, and create new opportunities for property development. These factors position Haily Group favorably for future growth.

The upcoming Budget 2025 is also expected to bring positive news for the construction and property sectors. Initiatives targeting affordable housing and development in key areas could further enhance demand for Haily Group’s expertise in building quality residential and commercial properties.

With a strategic focus on Johor’s thriving property market, strong project pipeline, and favorable economic conditions, Haily Group Berhad is well-prepared to capitalize on growth opportunities in the construction sector. The company’s strong orderbook pipeline and strong tenderbook is expected to yield positively for them in the upcoming financial year, bolstering their profitability. To recap – with such a strong orderbook on hand, we believe the financials of Haily Group will continue to improve, which could lead to a re-rating by investors in the near future.