Real Estate and Housing Developers' Association Malaysia (REHDA) has estimated the targeted development expenditure (DE) for Budget 2022 to be between RM60 billion and RM65 billion and may feature the roll-over of unutilised DE for 2021.

According to CGS-CIMB's research note today, what is key for Budget 2022, in REHDA's view, is a clearer implementation plan relating to the RM400 billion DE under the 12th Malaysia Plan (12MP), as the overall industry rail contractors and suppliers would be zoning down on the status of the Mass Rapid Transit (MRT3) project, which was missing from the 12MP.

"A short-term positive is, with mobility restrictions being lifted, the construction sector, including contractors with property development divisions immediately benefitting from the stabilisation of the industry's domestic supply chain in the fourth quarter of 2021 (4Q2021)," the research house said.

Concurring REHDA's view, CGS-CIMB said sector job replenishment prospects are expected to gradually improve in 4Q2021 and the first half of next year, however, the rollout of larger-scale new mega contracts may take some time to get off the ground due to funding limitations.

"REHDA reiterated that its cautiously optimistic view on the MRT3 project, which, if implemented earlier in 2022, would be a huge reprieve for rail contractors and suppliers as well as provide development catalysts along the alignment," it said.

As such, the research firm sees a better sense of the sector's potential bright spots in 4Q2021, which hinges on Budget 2022.

"Key sector risk is likely a longer lead time in 2022 before new mega contracts are approved and launched with firm funding plans," CGS-CIMB said, adding that this is mitigated by a ramp-up in sector productivity, which should be positive for earnings in the medium term.

CGS-CIMB reiterated its "Neutral" call on the sector and anticipates sentiment revival towards rail plays, with Gamuda as the top big-cap pick for the potential reactivation of MRT3.

It also anticipates more clarity on infrastructure targets, particularly the Kuala Lumpur-Singapore High-Speed Rail (HSR), in Budget 2022.

Yesterday, Minister in the Prime Minister's Department (Economy) Datuk Seri Mustapa Mohamed said the government is looking at alternatives and proposals to replace the HSR with domestic HSR between Kuala Lumpur and Iskandar Puteri, and Kuala Lumpur to the northern part of the country and Bangkok, Thailand. - Bernama