Falling ringgit, crude oil prices no dampener for construction sector
KUCHING: Construction players are still on the upcycle with government- initiated projects being strong catalysts for realizing Vision 2020 and arguably the key for the incumbent to retain the mandate in the next election.
MIDF Amanah Investment Bank Bhd ( MIDF Research) said infrastructure projects will lead the foray for construction sector giving strong focus on transitoriented development ( TOD), transit-proximate development 9TPD), transport networkbased infrastructure ( TNBI), greenfield downstream oil and gas engineering, procurement and construction ( EPC) contracts, and low cost housing.
“Our observations are based on the premises of government’s 2015 budget for infrastructure and infrastructure related spending of RM174 billion,” it said in a note yesterday.
These came af ter MIDF Research visited the GLC Open Day2015lastweek andparticipated in the GLC Transformation Story Forum led by Minister in the Prime Minister Department, Datuk Sri Abdul Wahid Omar.
The objective of the event was to illustrate how governmentlinked companies (GLCs) and government-linked investment companies (GLICs) have executed and will continue to execute the development policies led by Pemandu against the grim backdrop of falling crude oil prices and sliding value of the ringgit.
“Accordingly, we are sanguine on the outlook for the sector due to lower costs, more stable margin rate and buoyant domestic policy,” it added.
“Hence, we maintain positive for the sector whilst continuing to be additionally upbeat on smaller capitalized companies based on number of projects clinched and order-book replenishment rate.
“Therefore, players such as Eversendai Corporation Bhd, KKB Engineering Bhd and Muhibbah Engineering Bhd should remain attractive due to their wide exposures in EPC contracts of steel, structural and fabrication related to oil and gas.
“Ad d i t i on a l ly, Su nway Con st ruc t ion Bhd, IJM Corporation Bhd, Gamuda Bhd, Malaysian Resources Corporation Bhd, Protasco Bhd and WCT Bhd are potential beneficiaries of TOD, TOD and TNBI construction and development projects.”
MIDF Research also said Naim Holdings Bhd and Hock Seng Lee Bhd will also remain attractive and stands to benefit directly from Sarawak projects through the Sarawak Corridor of Renewable Eenrgy, TPD and Lebuhraya Borneo Utara ( LBU).
“We reckon that the tender process will start soon for LBU as the government has already appointed Lebuh Raya Borneo Utara Sdn Bhd as a project delivery partner,” it added.