RHB Investment Bank Bhd has maintained its “Overweight” rating on the construction sector, anticipating a stronger pipeline of development expenditure (DE) under the 13th Malaysia Plan (13MP), which was tabled in Parliament yesterday.
In a research note, the firm said the 13MP allocates RM430 billion in gross DE for the 2026 to 2030 period. This is an increase from the RM415 billion allocated under the 12MP for 2021 to 2025, with an annual average of RM86 billion.
“The increased allocation signals continued support for infrastructure development in areas such as info-structure, public transport, flood mitigation, and affordable housing,” RHB said.
Key projects highlighted under the 13MP include the Sarawak-Sabah Link Road, the Pan Borneo Highway, the Central Spine Road, and the Trans Borneo Highway. Other major developments are the Penang Light Rail Transit and the widening of the PLUS Highway in Johor.
RHB Investment also emphasised that public-private partnership (PPP) projects will remain central to project delivery mechanisms in the coming years, anchored by the Public-Private Partnership Master Plan 2030 (PIKAS 2030).
“Through PIKAS 2030, the government is projecting RM61 billion in private sector funding under the 13MP. PIKAS 2030 has identified a number of initiatives under its ‘Strategic Thrust 3: Expanding PPP models to diversify projects’ within the national plan.
“New PPPs could involve the West Ipoh Span Expressway, the Putrajaya-Bangi Expressway, and the East Coast Expressway Phase 3,” it said.
Flood mitigation was also identified as a top development priority under the new plan. RHB Investment noted a sharp increase in the number of projects aimed at mitigating flood risks, with 55 projects targeted for completion by 2030, up from just 17 in the previous year.
“Efforts to mitigate floods will continue with 43 high-priority flood mitigation projects worth RM12 billion that began last year. These projects are being carried out across flood-prone regions such as Johor, Muar, Pahang, Kedah, Sabah, and Perak,” it said.
The firm also highlighted that the government plans to implement a multi-tiered foreign worker levy (MTFWL) by 2026.
“While no details were disclosed under Budget 2025 regarding the MTFWL, our preliminary estimates find that the earnings of contractors like Southern Cable Group Bhd will be reduced by one per cent,” it said, indicating that the impact will likely be minimal on most construction firms.
RHB Investment’s top stock picks within the sector include Gamuda Bhd, with a target price of RM5.86, Sunway Construction Group Bhd at RM6.55, and Binastra Corp Bhd at RM2.64.
“However, our sector call is exposed to unexpected slowdowns in job rollouts, labour shortages, and scale-downs of data centre investments into Malaysia,” it added.
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