Multi-year construction boom fires up investor interest

With the recent infrastructure upcycle and pandemic-induced cost pressures easing, construction companies have been attracting greater investor interest.

Last year, total construction demand was $44.2 billion, double that at the pandemic trough of just over $20 billion. This year, the official projection by the Building and Construction Authority (BCA) is between $47 and $53 billion.

If the economists at Maybank are correct, the actual value this year will reach nearly $60 billion, with both public and private sector contracts accounting for half each. In their Sept 24 report, the Maybank economists point out that contracts awarded in the first six months of the year have already reached $27.7 billion, up 41% y-o-y.

 

Demand will be supported by the construction of the Changi Airport&rsquo s Terminal 5, further expansion of the Tuas megaport, the expansion of the two integrated resorts, various public housing developments, MRT projects, such as the Cross Island Line (Phase 3) and the Downtown Line Extension to Sungei Kadut, Woodlands North Coast industrial estate, commercial building redevelopments, and other urban rejuvenation developments.

Many of these projects are to be undertaken over several years, underpinning medium-term demand. According to BCA, total construction demand is projected to average between $39 billion and $46 billion from 2026 to 2029, suggesting steady prospects for healthy order books and margins for construction firms.

The robust prospects of this sector today are a marked contrast with the pandemic years, when work stoppages due to distancing measures and higher raw material costs resulting from supply chain disruptions led some unlisted contractors to go under. Many of the listed contractors have survived that downturn and their share prices year to date reflect the brighter prospects ahead.
 

GRC

GRC, formerly known as OKH Global, is a construction and property investment company focusing on logistics and industrial properties. Established in 1998, the company started as a local contractor specialising in renovation works and minor alteration and addition projects before acquiring the entire construction business of Chip Eng Seng in April for $118.5 million by paying new shares at 5.252 cents each.

GRC and Chip Eng Seng share the same controlling shareholders: the husband-and-wife team of Gordon and Celine Tang. They privatised what was then called Chip Eng Seng Corp in February 2023 and now own 65.4% of GRC. The Tangs also hold substantial stakes in Suntec REIT, OUE REIT and Acrophyte Hospitality Trust.

In its most recent FY2025 results, GRC saw its revenue rise by more than 1,000% y-o-y to $138.0 million as a result of the acquisition of Chip Eng Seng&rsquo s construction business. In line with higher revenue, gross profit increased by 117.8% y-o-y to $18.9 million.

With lower net fair value gains on investment properties and non-current assets held for sale and higher administrative expenses, net profit after tax increased by 101% y-o-y to $7.3 million.

As at June 30, GRC&rsquo s order book for its construction business segments stood at $2.3 billion, excluding contracts awarded after June 30 to Sept 5, amounting to $273.2 million. The company will continue to replenish its construction order book by capitalising on Chip Eng Seng&rsquo s track record.

Following the full-year results announcement on Sept 26, GRC announced major contract wins, including a $328.4 million building works contract from HDB and a $273.0 million contract from LTA, which involves the design and construction of road and commuter infrastructure works at several areas in Singapore.

The company also announced on Sept 30 that it is adopting a dividend policy where it aims to declare dividends on an annual basis with a target dividend payout ratio of approximately 30% of the company&rsquo s consolidated net profit after tax attributable to shareholders, after taking into account the group&rsquo s profitability, cash flow, future capital requirements and any other factors.

The company further explains that the ratio is a guideline and the actual dividend payout ratio may be higher or lower based on the board&rsquo s assessment.

In a now-familiar playbook for contractors, GRC plans to diversify into property development. Shareholders approved this diversification at an extraordinary general meeting that was held on Nov 28. In addition, the company is changing its name to Global Resource Construction.