Construction not seeing pickup yet, says HLIB

• The research house maintained a "neutral" rating on the sector
• Volatile and inflationary costs made tenders trickier

KUALA LUMPUR (July 4): Hong Leong Investment Bank (HLIB) Research said 1H22 domestic contract awards totalled RM4.5 billion (-49% y-o-y).

In a 2Q22 contract awards data release note on Monday (July 4), the research house maintained its “neutral” rating on the sector and said awards were largely made up of private-sector/solar jobs.

“On the whole, we reckon the significantly volatile and inflationary costs environment has made tenders trickier as most contracts are typically executed on a fixed price basis.

“Moving ahead we expect sector flows to finish strong buoyed by the MRT3 project; delays notwithstanding,” it said.

HLIB said notable contract wins in 2Q22 include: i) construction of robotic rehabilitation centre to Vizione (RM654 million); ii) main building works to Kerjaya Prospek (RM265 million); and iii) mixed development project to Tuju Setia (RM257 million).

“We retain our sector 'neutral' weight on two key reasons: i) high materials costs; and ii) possible event risk in 2H22.

“We continue to expect sector coverage earnings to recover this year but we flag rising concerns over deteriorating labour shortage situation. Preferred pick remains Sunway Construction Group Bhd ("buy"; TP: RM1.84),” it said.