Construction sector to remain busy for next few years

Construction sector to remain busy for next few years

KUALA LUMPUR, Jan 6 — The construction sector is expected to remain busy for the next few years, driven by mega-infrastructure projects underpinned by the MRT2, LRT3, RAPID, the Pan Borneo Highway, SUKE and DASH.

Maintaining an “overweight” call on the sector, Kenanga Research said local contractors stand to benefit from the contracts, with most awards expected to be out in mid-2016.

“The initial package for the MRT2 is likely to be awarded in the first quarter of this year. Listed contractors for the MRT1, including Mudajaya and IJM, are expected to stand a higher chance of securing the second package given their track record.

“Other players like WCT will be busy executing their massive outstanding order book of RM4.6 billion while eyeing more jobs. Muhibah is expected to remain focused on RAPID projects,” it said in a research note Wednesday.

The research firm sees a recovery in share prices for construction stocks under its coverage, with an average gain of 9.8% in the fourth quarter of last year, versus the third quarter’s average loss of 10.3%.

“We believe that the pick-up in share prices during the quarter were mainly driven by strong construction award flows, where we saw RM4.9 billion worth of local contracts being dished out, 42% higher than in the third quarter,” it said.

RAPID jobs made up 41 per cent of the RM4.9 billion, with WCT as the major winner with most contracts bagged, for a total of RM1.2 billion.