Construction shares – collateral damage

PETALING JAYA: Construction stocks on Bursa Malaysia were badly hit by news of a review of mega projects by the new Pakatan Harapan-led government, with stocks like George Kent (M) Bhd, Gabungan AQRS Bhd, Ahmad Zaki Resources Bhd and WCT Bhd hitting limit-down yesterday.

The construction index tumbled 36.35 points or 12.93% to 244.78 points, bucking the positive trend seen in the broader market.

Given the uncertainty in the implementation of the mega projects, JF Apex Securities head of research Lee Chung Cheng does not foresee any bargain hunting for construction stocks anytime soon.

“Maybe there will be some rebound, but the market still needs more clarity,” he told SunBiz.

Areca Capital Sdn Bhd CEO Danny Wong Teck Meng concurred, saying that the construction industry may need two to three months for more certainty.

“Valuations of some construction stocks are too ahead, it’s time to look at fundamentals,” he noted.

After a RM1.18 or 29.9% drop to RM2.76 in its share price, George Kent was quick to announce a share buy-back exercise of up to 10% of its total number of issued shares, which is due for shareholders’ approval at its AGM.

George Kent and MRCB are Project Delivery Partners (PDP) for LRT3.

Gamuda, which has been playing an active role in the local construction scene, also saw heavy selling pressure, leading to a 89 sen or 17.5% decline its share price to close at RM4.21.

Besides taking on the PDP role with MMC for the MRT 1 and MRT 2 projects, it was recently appointed PDP for the northern section of the Kuala LumpurSingapore High Speed Rail (HSR) project together with partner MRCB.

Ahmad Zaki and WCT shares shed 30 sen and 38 sen to close at 42 sen and 90 sen, respectively.

Prior to last Wednesday’s general election, Tun Mahathir Mohamad, now prime minister, had promised to review the HSR and the East Coast Rail Line (ECRL) if Pakatan Harapan won, saying that at RM55 billion, the ECRL was not feasible.

Nonetheless, ECRL deals have been gradually awarded. In March, Lafarge Malaysia bagged a RM270 million deal to supply cement to China Communications Construction (ECRL) Sdn Bhd for the project. - by Lee Weng Khuen