Khoo believes the revaluation catalyst for construction could be a positive flow of news as projects like MRT3 and Sabah are launched Pan Borneo Highway
FROM HARIZAH CAMEL / TMR FILE PIX
THE rollout of the Mass Rapid Transit Line 3 (MRT3) project could help stimulate the construction sector and economy, but tenders will likely be postponed to the fourth quarter of calendar year 2021 (fourth quarter 21).
With MRT2 expected to be completed by the end of 2022, MIDF Amanah Investment Bank Bhd expects the MRT3 to be the least hanging fruit that may be launched in the second half of this year (2H21) to stimulate the economy.
“We believe that the tender for MRT3 may end on the 4th due to the rising Covid-19 cases and political uncertainty.
Khoo said other mega-projects likely to start this year are the Pan Borneo Highway following the Sarawak state elections in September 2021, the planned high-speed rail project from Kuala Lumpur to Johor Baru, and the Klang Valley double-tracking phase 2 project.
Although some sections of the Construction sector now allowed to resume operations, Khoo posits that the reassessment catalyst for the construction sector could be positive news about the launch of mega-infrastructure projects like the MRT3 and the Sabah section of the Pan Borneo Highway.
Investors also need to make more robust gains from sector stocks with full construction and contracting resumes before investing new funds in the sector, he added.
The construction index fell from a high of 188.7 points in mid-April to a low of 160.9 points on July 13, before retracing slightly to 163.4 points yesterday.
MIDF sees the main beneficiaries of a sector revaluation in Gamuda Bhd with a ‘Buy’ call and a Target Price (TP) of RM4.20, IJM Corp Bhd (‘Buy’, TP: RM2.27), Sunway Construction Group Bhd ( ‘Buy’, VP: RM2.09) and Cahya Mata Sarawak Bhd (‘Buy’, VP: RM2.20).
“This is because of their respective strong track records on mega infrastructure projects, a solid, excellent backlog that could provide profit transparency for the next three to four years, and healthy balance sheets,” added Khoo.
Tan Sri Sufri Mhd Zin, president of the Master Builders Association Malaysia, said from recent news reports that major construction projects like building roads and other public infrastructure may operate. However, the scope has been shifted to state projects.
Therefore, the industry is looking forward to the government’s announcement to operate private projects.
“We understand that the return to operation exception requires strict adherence to Standard Operating Instructions (SOPs).
“We demand that the revised SOPs for the construction industry and all associated subsectors, if any, be published well in advance of the implementation date and not introduced at the last minute.
“We hope that there won’t be any additional SOPs or new regulations that add more cost to the projects,” he told TMR.
Sufri expects the industry to regain momentum and be fully functional by the end of this year as more construction workers are currently being vaccinated.
The construction industry, along with its supply chain, plays an integral and important role in the development of the country and contributes to the growth of the economy, he concluded.