ECRL, Bandar Malaysia revival to spur more construction jobs

KUCHING: The revival of the East Coast Rail Link (ECRL) and Bandar Malaysia projects shall result in more jobs available in the market for local construction players.

“However, we believe the market has not priced in enough risk premium to reflect the fact that the latest mega projects are driven by world-class Chinese contractors (and Chinese funding) which probably leaves the local contractors with only low-value/ low-margin supporting roles in the projects,” AmInvestment Bank Bhd (AmInvestment Bank) acknowledged in a company report on Econpile Holdings Bhd (Econpile).

Also, given the still elevated national debt, AmInvestment Bank saw that the government had no choice but to remain steadfastly committed to fiscal prudence which means the revival of the ECRL project could be a ‘zero-sum game’ as it may impede the government’s ability to implement other public infrastructure projects.

“We are also mindful of the acute oversupply situation in the high-rise residential, retail mall and office segments, which translates to weak prospects in property-related job wins for piling contractors like Econpile.

“Its valuations are unattractive at 16-fold to 33-fold forward earnings on muted earnings growth prospects.”

Meanwhile, the research firm is cautious n Econpile’s latest announcement regarding whollyowned subsidiary Econpile (M) Sdn Bhd being awarded a sum of RM67,767,269.32 together with costs, in relation to the award in the Adjudication proceedings under the Construction Industry Payment & Adjudication Act 2012.

“While the latest development is positive to Econpile, we will not count the chickens until the sum is recovered as this could involve liquidation proceedings that take years to complete.

“We understand that Econpile has not made any impairment with regards to this contract dispute, and hence there will not be any significant writeback even if the sum is finally recovered.”