,While things are looking brighter, MIDF Research head Imran Yassin Yusof says there are still “speed bumps” on the road to recovery for construction. “We are cautiously optimistic,” he tells StarBizWeek.
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WITH the relaxation of movement restrictions, optimism is returning to the construction sector which suffered disrupted activities and reduced productivity due to Covid-19.
Analysts see construction activities picking up in the fourth quarter of 2021, driven by accelerated billings from order book backlogs.
According to them, a full reopening of the construction sector looks possible by October following the government’s decision to allow industry capacity to go up to 100% if companies’ get their workers fully inoculated.
While things are looking brighter, MIDF Research head Imran Yassin Yusof says there are still “speed bumps” on the road to recovery for construction.
“We are cautiously optimistic,” he tells StarBizWeek. According to him, the construction sector was one of the research firm’s recovery plays at the start of the year. But this got a bit delayed due to the resurgence of Covid-19 and subsequent movement restrictions, which had impacted companies’ earnings in the second quarter of 2021.
That said, there is still wariness on the ground although many economic sectors have reopened. This is also true for construction, which may see nervous clients holding back projects for a while.CLICK TO ENLARGE
Analysts do not discount the possibility of any intermittent coronavirus outbreak at sites leading to operational constraints that would slow down progress billing.
One impetus for the sector, Imran says, is the tabling of the 12th Malaysia Plan (12MP) later this month where infrastructure development projects could be announced to stimulate the economy and the job market. The next event to look out for is Budget 2022.
However, some think the upcoming Budget is likely be uneventful for the sector with the government’s focus remains on aiding the more adversely-affected tourism and retail sectors, besides improving the public healthcare system and cash assistance for low-income groups.
“The government might reiterate projects previously mentioned in Budget 2021 such as the Mass Rapid Transit Line 3 (MRT3) and Pan Borneo Highway but this is unlikely to spur interest in the sector.
“We believe the construction sector’s prospects will only show significant improvements after the next general election (due in 2023), once the country has a more stable government,” opines UOB Kay Hian (UOBKH) Research in a Sept 7 report.
For the near term, some factors could still stand in the way of the sector’s return to normalcy. Higher operating costs from Covid-19 standard operating procedure compliance and rising raw material costs such as steel, which is currently priced at RM3,200 per tonne as compared to RM2,650 per tonne in January, would eat into margins of existing projects.