Infrastructure jobs to support construction sector order book replenishment
PETALING JAYA: With construction jobs from the property sector staying subdued, the infrastructure sector will support the construction sector’s order book replenishment in the current year and into 2017, according to MaybankIB Research.
It said infrastructure job awards in the first half of 2016 (1H16) came to RM30 billion, according to statistics by the Construction Industry Development Board. This has exceeded the value for the whole of 2015, of RM26 billion. The RM30 billion should include RM23 billion worth of Klang Valley Mass Rapid Transit 2 (KVMRT 2) jobs.
“We estimate the total infrastructure award value has climbed further towards the RM40 billion mark by now, including Sungai Besi-Ulu Kelang Elevated Expressway (SUKE) and Damansara-Shah Alam Elevated Expressway (DASH). Whether 2016 will be another record year will depend on whether substantial of the KVLRT 3 jobs will be awarded this year, or next. What is of real importance is that the pace of job awards continues to roll, implying delivery commitment by the stakeholders,” MaybankIB said.
It added that there are still the remaining packages of the KVMRT 2 (estimate over RM5 billion), Pan Borneo Sarawak Highway (RM11 billion) and West Coast Expressway (RM2 billion), besides the KVLRT 3 (RM9 billion), into 2017.
Beyond 2017, the Kuala Lumpur to Singapore High Speed Rail (RM70 billion) will be the single largest infrastructure project. A study on the KVMRT 3 (Circle Line) has also started positively. Other rail related commitments are the Gemas-Johor Baru double track rail (RM7 billion) and East Coast Rail, the latter will help support the development of Kuantan Port.
In 1H16, the government’s gross development expenditure (GDE) totalled RM20.1 billion, meeting 45% of the revised allocation of RM45 billion-RM46 billion for the year (revised during Budget 2016 Recalibration at end-January 2016). The RM45 billion for 2016 however, makes up just 17% of the RM260 billion GDE under the 11th Malaysia Plan.
“We expect a higher GDE allocation for 2017 – this may allow construction of some other public transportation projects like the KLKlang BRT line to start,” said MaybankIB.
It remains positive on the construction sector and its top buy pick is Gamuda Bhd, followed by Sunway Construction Group Bhd.