Construction sector ‘overweight’ with mega rail jobs

KUALA LUMPUR: Hong Leong Investment Bank ( HLIB) has maintained its “overweight” call on the construction sector following an increase in the total number of contracts awarded, especially in the rail section.

In a research note today, it said the call was based on the strong momentum of contract flows to be sustained over the next one or two years, driven by several mega rail jobs such as the East Coast Rail Line ( ECRL), Mass Rapid Transit Line 3 (MRT3) and Kuala LumpurSingapore High Speed Rail ( KLSG HSR).

“Our top picks are centred on the upcoming influx of mega rail projects,” it said.

Meanwhile, HLIB also recommended a “buy” on Gamuda shares with a target price (TP) of RM6.36, given its strong track record with civil rail projects, which includes the northern double track, MRT1 and MRT2. It also recommended a “buy” call on George Kent Bhd following its position as a local player with expertise in rail related systems.

In the note, HLIB highlighted that domestic contracts awarded to listed contractors in fourth quarter last year (4Q17) amounted to RM10.9 billion, an increase of 41 per cent quarter- on- quarter (qoq) and 61 per cent year- on-year (y- o-y). The increase was driven by Light Rail Transit line three ( LRT3) contracts worth RM5.5 billion awarded to Sunway Construction Group Bhd, WCT Holdings Bhd, Gabungan AQRS Bhd, Mudajaya Group Bhd and Econpile Holdings Bhd.

Meanwhile, foreign contracts also picked up in 4Q17 to RM1.5 billion, bringing the total foreign contract wins for 2017 to RM2.7 billion, an increase of 87 per cent y- o-y. The bulk of foreign contracts came from IJM Corp’s job on the Solapur-Bijapur Highway in India, worth RM1.3 billion. — Bernama