Slow orderbook replenishment expected for local contractors
KUCHING: Slow orderbook replenishment is expected for the local contractors for at least the next 12 months, analysts say in a construction sector update.
Following the election results, coupled with generally disappointing first quarter of 2018 (1Q18) results for the construction companies, Affin Hwang Investment Bank Bhd (AffinHwang Capital) cut earnings per share (EPS) forecasts for most construction companies to reflect lower orderbook replenishment and profit-margin expectations given the challenging outlook.
“We estimate the potential large-scale infrastructure projects to be implemented from 2019 onwards following the review will be reduced to RM108 billion from RM222 billion previously,” it said.
“The major change is the exclusion of the Klang Valley MRT Line 3 (MRT3) and high speed rail (HSR) projects from the list as they have been postponed or cancelled by the government.”
According to AffinHwang Capital, the ongoing reviews of public-sector infrastructure projects have raised uncertainties on the status of ongoing and planned infrastructure projects.
The research firm noted that this has led to volatility in the share prices of the construction stocks.
“Prime Minister Tun Dr Mahathir Mohammad said that the Kuala Lumpur- Singapore HSR project has been postponed, and not scrapped as stated previously, leading to a relief rally for impacted firms.”
AffinHwang Capital opined that these developments indicate that the infrastructure spending cuts may not be as severe as initially portrayed in statements made by the new government previously. Turn to Page B2, Col 1