PETALING JAYA: RHB Research has placed an “overweight” call on construction, property, healthcare and energy (oil and gas, utilities) sectors for the upcoming Budget 2024.

The research firm, however, remained “neutral” on consumer, automotive, gaming, telecommunications and technology sectors.

Under the construction sector, RHB Research said in its Budget 2024 preview that: “We could expect the development expenditure (DE) for Budget 2024 to be around RM90bil.”

With the Penang Light Rail Transit, the remaining phase of Pan Borneo Sabah, Bus Rapid Transit system in Johor Baru and Klang Valley and Phase 2 of the Sabah-Sarawak Link Road being outlined under the 12th Malaysia Plan (12MP) mid-term review (MTR), it said: “We believe the DE allocation for the transportation sub-sector may be higher than that for 2023.”

It also expected more updates on the progress of Mass Rapid Transit 3 cost review in Budget 2024.

“We also do not discount potential mentions about flood mitigation projects nationwide under Budget 2024,” it said, adding that more details on the multi-tiered foreign worker levy are likely to be laid out as well.

Hence, RHB Research said ample supply of labour, combined with manageable material cost pressures, will put contractors in a sweet spot to ramp up their project progress, but also be ready to accept new jobs, which may boost earnings visibility.

The research firm’s top picks are Gamuda Bhd, Kerjaya Prospek Group Bhd and Sunway Construction Group Bhd.

As for property, it does not anticipate any major announcements but “the government may potentially provide some incentives or easy financing for first-time home buyers in Budget 2024.”

“We believe rent-to-own initiatives may also be expanded, in line with what was mentioned under the 12MP MTR,” it noted.

Under the energy sector, RHB Research believed Budget 2024 will continue to emphasise on transition with more environmental, social and governance-friendly measures being implemented.

“Industry players are expecting the continuation of existing tax incentives including the Green Investment Tax Allowance,” it added.

Additionally, it will not be a surprise if there is an allocation for renewable energy development, and perhaps grid infrastructure upgrades as well as an announcement of targeted fuel subsidies.

The healthcare sector is expected to get a higher budget allocation in 2024, with the bulk expected to be channelled towards the nation’s healthcare infrastructure to improve service quality and ensure the affordability of public healthcare services, said RHB Research.

“We believe the necessary funding is required to successfully execute various ambitions outlined in the Health White Paper, which further demonstrates the government’s commitment towards structural reforms of the nation’s healthcare system.”

Meanwhile, RHB Research believed Budget 2024 will put greater focus on matching grant, investment tax allowances as well as encourage more foreign direct investments to move Malaysia up the value chain in the technology space.

This includes integrated circuit design, fabrication, advanced materials as well as the aerospace, pharmaceutical and medical devices sectors.

“We also expect the government to continue promoting electric vehicle (EV) components such as charging equipment via tax exemptions and investment tax allowances, which could indirectly benefit the EV component and supply chain in Malaysia,” it added.

Thus, a more detailed framework, grants and public-private partnership projects could again be the emphasis in the upcoming federal budget, due next month.

The auto sector could likely see incentives related to EV charging infrastructure, locally assembled EV incentives and EV road tax reform under Budget 2024.

RHB Research believed the incentives to further support the manufacturing and assembly of completely-knocked-down EVs is on the table.

This is in line with the government’s vision for the Automotive Hi-Tech Valley to be the South-East Asian hub for EV manufacturing and component supplies.

It also anticipated the revised EV road tax structure to be finalised and announced in Budget 2024.

Elsewhere, while the new gaming taxes look remote, RHB Research was unable to rule out higher excise duties on tobacco and brewery, although these will require a step-up in enforcement initiatives.