Optimism over construction projects in Budget 2020

KUALA LUMPUR: Affin Hwang Capital research remains overweight on the construction sector as it expects more public sector projects to be implemented under Budget 2020 on Oct 11.

In a note, it said that its top buys are Gabungan AQRS Bhd, Gamuda Bhd, Sunway Construction Bhd (Suncon) and Pintaras Jaya Bhd.

Among its expectations for the upcoming budget, it said the government will be looking to revive the Klang Valley MRT Line 3 project.

An announcement in Budget 2020 could start the process of designing and approving the railway scheme in 2020, and construction to begin in 2021, it said.

Affin Hwang expects Gamuda to have a competitive advantage in bidding for the MRT3 project as it is the main contractor for Lines 1 and 2, while other potential beneficiaries include HSS Engineers Bhd, IJM Corp Bhd, Suncon and WCT Holdings Bhd for the stocks under its coverage.

The research house also expects tenders for the East Coast Rail Link (ECRL) to be called starting in 4Q19 for local subcontractors to undertake 40% of the civil works, excluding tunnel works. “The alignment for the 223-km stretch (out of a total length of 640 km) from Dungun to Mentakab called Package B has been finalised,” it said.

According to Affin Hwang, Gabungan AQRS is confident of securing a package for the ECRL Package B stretching 44-100km, depending on the risk-reward of undertaking the subcontract works.

The research house estimates a Rm1.22.7bil value for the ECRL contract works Gabungan AQRS is vying for.

Meanwhile, it believes Kimlun Corp Bhd, Pintaras and Suncon are key beneficiaries of a growing demand for construction services in Singapore.

The growing infrastructure spending and public housing development as well as private condominium redevelopment is positive for Malaysia pre-cast concrete product suppliers and contractors, it said.