Construction sector to stay robust in coming 4, 5 years

KUCHING: The construction sector will stay strong in the next four to five years on the back of sizeable outstanding order books and upcoming contract awards, analysts say.

TA Securities Holdings Bhd’s research arm (TA Securities) in a strategy report said, “We are positive on the outlook for the construction industry. On top of sizeable outstanding order books, we expect the construction companies to benefit from the upcoming contract awards.

“We anticipate construction activities to pick up momentum in 2017 and the industry to stay robust in the coming four to five years.”

It highlighted that it is upbeat on the outlook of the industry, following the announcements of awards to several construction companies for several works packages of MRT Line 2 and major Pan Borneo Highway Sarawak.

“We expect more news flow on the awards of construction contracts in 2H16.

"These mainly come from remaining packages of MRT line 2, Pan Borneo Highway Sarawak, West Coast Expressway as well as construction contract awards for LRT line 3, Southern Double Track, DASH, SUKE, and civil works at RAPID Pengerang, TRX and Kwasa Damansara.

“Moreover, most of the construction stocks under our coverage are backed by sizeable outstanding order books, which will keep them busy at least for the coming two years,” it said.

However, TA Securities said, it is less sanguine on the property segment given the subdued property market sentiment.

“Slower property sales have been observed in most of these construction companies as the outlook for property sector has turned more cautious,” it added.

Overall, it maintained its ‘ overweight’ call on the construction sector. However, it pointed out that potential downside could come from delay in implementation of projects, shortage of resources and escalation in operating costs and prices of building materials.