THE strong pipeline of public infrastructure projects will help construction and civil engineering companies weather the decline in private works volume.
This month alone, eight listed companies have won contracts for public transport, housing and school development.
These include Kori Holdings, which was awarded two Thomson Line MRT contracts totalling $52.9 million, TriTech, which clinched a $19.24 million deal for sewer works in Sembawang, and ISOTeam, which secured $22.2 million worth of repair and design work for town councils.
The sector's robust order book for public works is not a recent development, CIMB economist Song Seng Wun told The Straits Times, as the Government continues to step up its spending on infrastructure projects while private sector projects are slowing down.
Deputy Prime Minister Tharman Shanmugaratnam flagged some of this in his Budget speech earlier this year: "We have a lot more to do in infrastructural investments... By 2030, we will be doubling our entire rail capacity to 360km. The expansion of Changi Airport will be another important investment."
Mr Song said: "In the 12 months to October 2014, $38.5 billion worth of construction contracts were awarded, of which $21.3 billion were in the public sector. This is a large pickup from the $13.2 billion recorded in the same period a year before.
"Meanwhile, by the same comparison, private contracts eased off from $22.9 billion to $16.7 billion, due partly to the slowdown in private housing developments amid the cooling measures."
The Building and Construction Authority is forecasting that at least $14 billion to $18 billion worth of public contracts will be awarded next year and again in 2016, so companies can expect a robust project pipeline easily into next year, said Mr Song.
The construction sector is set for its 10th straight year of growth - at 4 per cent this year - despite manpower woes, he said.
Major projects are also lined up over the next two decades, including the Jurong Region MRT Line by 2025, the Cross Island Line by 2030 and further extensions to existing MRT lines through the 2020s.
This paints a very positive outlook for companies like civil engineering firm Huationg Global, which listed on the Catalist board this month in preparation for an expansion that chief executive Patrick Ng expects to be driven mostly by public sector work.
"Our civil engineering revenue to be recognised over the next one to three years is around $114.3 million. Over 90 per cent of that will come from public contracts," said Mr Ng, when announcing his company's initial public offering on Dec 1.
But Mr Ng Kian Teck of Voyage Research is less optimistic.
"The public contract pipeline will remain strong, but these projects typically have a lower margin, sometimes lower than 10 per cent compared with the 10 to 15 per cent range for private projects," said Mr Ng, the firm's deputy head of research.
"This will be further pressured by the increased competition as more foreign players come to bid for these projects.
"Also, the foreign worker levies remain in the backdrop; we have no clarity on what the Government plans to do with the levy system beyond 2016. Overall, the sector's profit outlook is not necessarily positive. Much will depend on a company's expertise and adaptability."