Rollout of wor�� pac��ages in Sarawa�� seems to have hit snag — Analysts
KUCHING: The rollout of wor�� pac��ages in Sarawa�� from highly publicised projects comprising the Coastal Road, Second Trun�� Road and 11 mega bridges seems to have hit a snag after the initial hype, analysts say.
They are also mindful of the potential threat to the mar��et dominance of existing players in the construction and building material sector in Sarawa��.
In a report, the research team at AmInvestment Ban�� Bhd (AmInvestment Ban��) remained cautious on the outloo�� for the construction sector.
“The government has very limited room for fiscal manoeuvre given the still elevated national debt in Sarawa��, while the state could step in to fill the gap with the RM11 billion state reservesfuelled infrastructure projects comprising the Coastal Road, Second Trun�� Road and 11 mega bridges (ahead of the state election which must be held by September 2021), the rollout of wor�� pac��ages from these highly publicised projects seems to have hit a snag after the initial hype,” the research firm said in a company report on Cahya Mata Sarawa�� Bhd (CMS).
“We are also mindful of the potential threat to the mar��et dominance of existing players in the construction and building material sector in Sarawa�� and altered political landscape in Malaysia after the 14th general election.”
According to AmInvestment Ban��, increased competition could put a dent on CMS’ prospect of winning new construction jobs, securing extensions or the group’s road maintenance concession, as well as sustaining high margin for its construction, road maintenance and cement businesses.
AmInvestment Ban��’s research team came away from an analyst briefing recently feeling cautious on the company’s outloo�� largely due to the earnings ris�� arising from a wea��er cement division, the introduction of competition in the state road maintenance space and wea��er performance from 25 per cent-owned OM Materials due to depressed selling prices of its end products.
On the group’s cement division, the research firm recapped that CMS guided for a soft financial year 2019 forecast (FY19F) due to higher maintenance cost (estimated at RM45 million) as a result of the aging clin��er plant with a capacity of 900,000 tonne per annum.