‘Overweight’ on construction sector

‘Overweight’ on construction sector

PETALING JAYA: AmInvestment Bank Bhd has maintained its “overweight” rating on the construction sector, as it believes the new infrastructure awards and tenders will continue to drive the sector in the second half of the year.

“We believe infrastructure awards will dominate in the second half, driven by packages for Klang Valley Mass Rapid Transit Line 2 (KVMRT2), Light Rail Transit Line 3 (LRT3), Pan Borneo Highway, Sungai Besi-Ulu Kelang Elevated Expressway and Damansara-Shah Alam Elevated Expressway,” its analyst Max Koh said.

The research house reiterated its “buy” call for Gamuda, IJM Corp, Econpile Holdings, Ikhmas Jaya Group, Hock Seng Lee, KKB Engineering, Kimlun Corp, and Sarawak Cable and “hold” recommendation for WCT.

To date, AmInvestment estimates that Mass Rapid Transit Corp Sdn Bhd has awarded RM22 billion worth of major KVMRT2 packages, from the total value of RM32 billion.

Koh said major packages awarded include the underground works worth RM15 billion to the MMC-Gamuda joint venture, four viaduct packages, three system packages and four main packages for Pan Borneo.

In the first quarter of 2016, Koh said, the construction awards fell 66% year-over-year to RM11.9 billion, where March recorded the lowest in terms of number of projects and value.

Nevertheless, he said, the research house foresees a strong rebound as major awards were dished out in the later part of the first half of 2016.

In addition, Koh said he believes that the awards for the RM9 billion LRT3 project will come in earnest in the second half, following the completion of the prequalification stage with 96 out of 124 applicants making the cut.

He also said that apart from the familiar big boys, the research house sees the potential beneficiaries for the KVMRT2 jobs to include Kimlun (for SBG supply), Econpile and Ikhmas Jaya for piling works.

“We continue to like specialist contractors such as Kimlun, Econpile and Ikhmas Jaya to secure specialised contracts in the second half. Sarawak Cable is also a niche player that will benefit from power transmission line projects in Sarawak and Peninsular Malaysia,” Koh said.

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