My Quick Take On Construction Companies (2022 Version)

According to the Department of Statistics Malaysia (DOSM), the Malaysian construction industry expanded by 40.3% year on year (YoY) in the second quarter of 2021, preceded by a Y-o-Y decline of 10.4% in the previous quarter, supported by growth in specialized construction activities and building construction, offsetting the weakness in civil engineering construction works. However, construction activities were completely suspended in June 2021, and in some areas in July 2021, with only critical construction permitted during the lockdown period, causing the construction industry to experience an 8.8% quarter-on-quarter (Q-o-Q) decline in Q2 2021.

The construction industry is expected to register an annual average growth rate of 6.8% between 2022 and 2025. Over the forecast period, growth will be driven by investment in transportation and energy projects. In September 2021, the government announced a plan to establish the Public Private Partnership (PPP) 3.0 model, as a specialized mechanism to fund infrastructure projects to stimulate economic growth in the 12th Malaysia plan between 2021-2025. In June 2021, the government unveiled its energy transition plans until 2040, aiming to increase the proportion of renewable energy in the total energy mix from 2% in 2019 to 31% by 2025, and 40% by 2035.

Over the forecast period, the industry's growth will also be supported by a recovery in economic conditions, coupled with investment in residential, industrial and water infrastructure projects. As part of the 12th Malaysia plan, the government announced its goal of developing 120 cities to achieve sustainable city status by 2025, by providing additional support to private sector projects implementing strategic development programmes. The government also intends to construct 500,000 affordable houses by 2025, as part of the 12th Malaysia Plan. In September 2021, the federal government approved the state government of Kelantan's MYR25.8 billion (US$6.4 billion) water infrastructure project, assisting Kelantan and other states in enhancing water supply coverage and efficiency.

https://finance.yahoo.com/news/key-trends-opportunities-malaysian-construction-101500142.html

The overall construction is poised to recover in 2022 as more infrastructure projects might be exposed to the market. We had filtered 7 construction companies based on our criteria, in which they had good historical financial performance as well as reasonable trailing valuations.

Moving into 2022, we believe sound valuation coupled with solid financial performance remains as the key pillar of investments for investors. Hopefully, these selected companies would give us extraordinary gain in 2022.

Cheers.