Construction stocks slip as govt shies away from new megaprojects

• Analysts covering construction stocks are neutral to positive on Budget 2025, taking into account the slight decline in net development expenditure, absence of new megaprojects, and lack of details for key projects such as the third phase of the Klang Valley Mass Rapid Transit (MRT3).

KUALA LUMPUR (Oct 21): Shares of Malaysian construction companies slipped on Monday, as the government refrained from announcing new mega infrastructure projects in Budget 2025.

IJM Corporation Bhd (KL:IJM) declined more than 3% to RM2.85, while Gamuda Bhd (KL:GAMUDA) was down 2.3% to RM8.01. The Bursa Malaysia Construction Index, which tracks 49 stocks in the sector, fell 1.7%, underperforming the broader market.

Analysts covering construction stocks are neutral to positive on Budget 2025, taking into account the slight decline in net development expenditure, absence of new megaprojects, and lack of details for key projects such as the third phase of the Klang Valley Mass Rapid Transit (MRT3).

Phillip Capital pointed out that no major drivers were revealed for the construction sector in Budget 2025, though there are enough jobs for contractors in ongoing projects such as the Pan Borneo Sabah 1B and Sabah-Sarawak Link Road Phase 2.

Budget 2025 is allocating RM86 billion to gross development expenditure, unchanged from 2024. Net development expenditure, after deducting loan recoveries, will fall to RM84.7 billion in 2025.

On Friday, Prime Minister Datuk Seri Anwar Ibrahim said the government will focus on “social infrastructure and developments for key industrial areas according to state priorities". Key projects highlighted include Johor-Singapore rapid transit system (RTS) and Penang light rail transit (LRT).

Development expenditure may not see “meaningful increases going forward” as the government spends more carefully and turns to the private sector for future funding, said CGS International. “The more pertinent issue is the focus… on the more immediate high multiplier projects with a clear timeline.”

Budget 2025 nevertheless reaffirmed the government's commitment towards several big-ticket projects, said CIMB Securities. Ongoing initiatives, particularly in northern Malaysia and East Malaysia, will likely keep contractors busy, the research house said.

Further, that there have been no deferments to major ongoing projects under Budget 2025, which will continue to keep contractors busy, it added.

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