KUALA LUMPUR: Kenanga Investment Bank has reiterated its Neutral call on the construction sector premised on the prospect of fewer major construction job opportunities in the near term against an uncertain backdrop.
The investment bank said it also remains to be seen whether the new federal government, like its predecessor, would review existing and new major construction projects after taking office.
“The new federal government may want to review the pipeline of construction jobs previously touted to be revived as part of its revamped growth strategy, which probably would take some time for the dust to settle as the new government gets down to work before any key policies are made,” it said in a research note today.
It said these include the RM3.2 bil Johor Bahru-Singapore Rail Transit System (RTS) with the finalisation of contract terms previously scheduled for April, and the RM60 bil Kuala Lumpur-Singapore High Speed Rail (HSR), which is supposed to be revisited by both countries in May.
Other projects are the RM40 bil Mass Rapid Transit 3 (MRT3) that was earlier speculated to be considered for revival in the latter part of this year, and the RM32 bil Penang Transport Master Plan (PTMP), which the previous federal government had agreed to guarantee the bond financing for the LRT component.
Nevertheless, it said, investors are expected to turn to Sarawak for potential catalysts in the construction sector as the state government has big plans to roll out major infrastructure projects to stimulate economic activity.
It said timing-wise, it would make political sense to roll out these projects to stimulate economic activity ahead of the Sarawak state election, which must be held by September 2021.
The investment bank’s top pick for the sector is Gamuda with a target price (TP) of RM3.70.
Meanwhile, Hock Seng Lee Bhd (TP: RM1.69) is Kenanga Investment Bank’s selection for exposure to the rising construction activity in Sarawak. – March 11, 2020, Bernama
