KUALA LUMPUR: Maybank Investment Bank Research (Maybank IB) has maintained its “neutral” call on the local construction sector as potential revival of the East Coast Rail Link (ECRL) and affirmation of the Penang Transport Master Plan (PTMP) projects would spark some optimism into the sector.
That said, potentially lower margins and a smaller order book replenishment for the second consecutive year, would bring back interest into earnings delivery, especially from 2020.
“Sector valuation remains fair, balancing the risk-reward. The value of new job awards is expected to continue moderately after the good years in 2016/2017 as a result of reprioritisation of major infra projects,” said the research bank in a note yesterday.
It said as Budget 2019 was spared new major infra projects, contractors’ order book replenishment opportunities, would hinge on ongoing projects such as the Pan Borneo Sabah, Gemas-Johor Bahru double-tracking rail and Central Spine Road, for the award of remaining packages.
The order book wildcard could come from the PTMP, Klang Valley Double Track (Phase 2), Johor-Singapore Rapit Transit System (RTS) Link and potential revival of the ECRL.
Maybank IB also highlighted Sarawak’s rollout of key infra projects such as the Sarawak Coastal Road and Second Link Road as well as the State Water Grid.
The fund allocation on the development spending for the projects are worth RM9.1 billion.
“Cahya Mata Sarawak Bhd (CMS) is our only ‘buy’ call for the sector and is a prime beneficiary of the rollout of infra projects in Sarawak, being the sole cement and key building materials supplier in the state.
“The company is also tendering for work packages from the Coastal Road and Second Link Road worth about RM1 billion for each package,” Maybank IB said.
As at 12.11 pm, the share price of CMS was 11 sen higher at RM3.09 with 864,700 shares transacted. – Bernama
