RHB has made a “Neutral” call on the construction sector with the top picks being Sunway Construction Group Bhd and MGB Bhd.
It said that the reopening of the economy in 4Q21 resulted in a higher value of construction work done, ie up 11.5% YoY in 4Q21 to reach MYR27.6billion.
The stockbroking firm said that in the same period, the sector’s GDP grew by 6.8% YoY to hit MYR12.6billion in 4Q21, following four quarters of sequential decline.
Meanwhile, RHB said that other risks such as high raw material prices and the labour shortage may continue to linger within the construction sector, which could affect output levels ahead.
On concerns of the Mass Rapid Transit Line 3 (MRT3) project, the research house said that there are delays in the rollout of tender packages and the reluctance by Tier-1 contractors to take on funding risks, assuming a public-private partnership model is implemented.
It said that the concerns over the limited fiscal headroom of the Government is a worry on whether other mega infrastructure projects can be revived later.
On 4Q21 performance, it said that the 4Q21 results were a mixed bag, three companies reported numbers that were in line, three fell below expectations, and three more exceeded expectations.
It said that in general, activity levels at construction sites have reached pre-pandemic levels, considering the economic reopening from 4Q21 onwards.