Maybank IB upbeat about construction sector, expects jobs to pick up

Construction contracts and job flows are expected to pick up this year, with the focus on the East Coast Rail Link (ECRL) subcontracting packages, said analysts.

Maybank Investment Bank (Maybank IB) analyst Adrian Wong said the proposed realignment of the Kota Baru-Dungun stretch under the ECRL was undergoing a three-month public inspection process until Feb 24.

“We believe tenders for the subcontracting civil work packages could start by the second quarter of this year, with awards in the second half. We also expect the remaining packages from projects such as the Pan-Borneo Highway, Sarawak Coastal Road and Sarawak-Sabah Link Road to be awarded,” he said in a report yesterday.

Although the Kuala LumpurSingapore high-speed rail and the Klang Valley Mass Rapid Transit 3 projects remained wildcards, Wong said any announcement of the projects’ revival would excite the market.

“We are upbeat about the construction sector’s outlook this year, and we have a ‘positive’ stance on Gamuda Bhd as our preferred ‘buy’ pick.”

Wong estimated that local contractors would secure up to RM10 billion of jobs from the ECRL, based on the rule of thumb that 40 per cent of total civil works would be awarded to them.

He said the Penang government had in October last year received a federal government guarantee to raise bonds to fund the Bayan Lepas light rail transit.

“This will expedite the start of the Penang Transport Master Plan. Assuming the project delivery partner agreement is finalised in the first quarter, we could see the first awards by the end of this year.”

Wong said the higher gross development expenditure allocation of RM56 billion in the 2020 Budget also signalled the government’s commitment to developing public infrastructure.

Meanwhile, Hong Leong Investment Bank expects contract awards to accelerate as the government rolls out major infrastructure projects.

“Stronger job flows from Sarawak are anticipated with a record high allocation of about RM10 billion for development expenditure.”

It has maintained a “neutral” call on the construction sector, noting that that mega project news flow and healthy order book levels should protect the sector on the downside.

“The first half should be dominated by tender news flow regarding the ECRL and Pan-Borneo Highway.”