THE soon-to-be-tabled Budget 2022 must provide a clearer implementation plan relating to the RM400 bil development expenditure (DE) earmarked under the 12th Malaysia Plan (12MP) as the overall industry rail contractors/suppliers will be zoning down on the status of the Mass Rapid Transit Line 3 (MRT3) project (RM20 bil-RM30 bil) which was missing from the 12MP.
This is the industry feedback following a webinar between CGS-CIMB Research and the Real Estate and Housing Developers Association (REHDA) president Datuk Soam Heng Choon, who is also a board member of the Construction Industry Development Board (CIDB).
“According to Soam, industry players welcome the huge RM400 bil DE but what could make it more appealing is if it comes with detailed breakdowns and timeline targets, and more clarity on whether any of the outstanding new mega projects will benefit from the disbursements of the DE in 2022,” revealed analyst Sharizan Rosely in a construction sector review.
“From the 12MP narrative, what is clear at this juncture is that a ‘big bang’ development allocation is unlikely to occur in 2022 given the current limited fiscal space with 2022F DE likely to range between RM60 bil and RM65 bil.”
Moving forward, CGS-CIMB Research said it concurred with Soam’s view that Government contract awards could play catch-up in the coming months (only circa 30% of the value of contracts awarded year-to-date in terms of public sector contracts with the balance 70% from the private sector).
“In 4Q 2021F and 1H 2022F, sector job replenishment prospects is seen to gradually improve. However, the roll-out of larger-scale new mega contracts may take some time to get off the ground due to funding limitations,” noted the research house.
“REHDA reiterated its cautiously optimistic view on the MRT3 project, which if implemented earlier in 2022, would be a huge reprieve for rail contractors/suppliers and provide development catalysts along the alignment.”
All-in-all, CGS-CIMB Research reiterated its “neutral” rating on the construction sector in anticipation of sentiment revival towards rail plays.
“Key sector risks will likely linger on longer till 2022 before new mega contracts are approved and launched with firm funding plans,” projected the research house. “In the medium term, this is mitigated by a ramp-up in sector productivity which should be positive for earnings.”
Gamuda Bhd is CGS-CIMB Research’s top big-cap pick for the potential reactivation of MRT3. – Oct 15, 2021
