KUCHING: Malaysia’s construction sector is expected to remain “energetic and enthusiastic” in 2015, driven by large scale-projects announced during Budget 2015 which include projects such as the Pan-Borneo Highway in Sarawak.
M&A Securities Sdn Bhd’s research team (M&A Securities) in a recent Equity Strategy Outlook 2015 report for Malaysia, said Budget 2015 gave a clear indication on the continuous growth prospect of construction sector, underpinned by major railway and highway projects to be implemented in 2015.
With the aim to develop an efficient and integrated public transportation in Malaysia, the government is set to spend big to the tune of RM120 billion, it added. The research team said, according to the latest Malaysia Economic Report 2015, the government projects construction sector real output to gross domestic product (GDP) to raise by 10.7 per cent in 2015.
“The key projects consist of KVMRT2 (RM23 billion), LRT3 (RM9 billion), Pan-Borneo Highway (RM27 billion) and West Coast Expressway (RM5 billion). Other projects that could get a ‘go’ next year include Eastern Klang Valley Expressway (RM1.6 billion), Damansara-Shah Alam Highway (RM4.2 billion), Sungai Besi-Ulu Klang Expressway (RM5.3 billion) and upgrading the East Coast railway (RM150 million),” it explained.
On the individual projects, the research team highlighted, “MRT Corp has appointed Gamuda-MMC to be the project delivery partner (PDP) for KVMRT2 which is within our expectation based on their excellent track record in developing KVMRT1 and their investment in related machinery such as Tunnel Boring Machine (TBM).
“The tendering is expected to be called by the second half of 2015 (2H15) with initial contract awards could be expected by 1H16 onwards.
“MRT Corp has hinted that the award for KVMRT2 may be skewed towards existing players in KVMRT1 such as IJM Corporation Bhd, Gadang Holdings Bhd, Mudajaya Group Bhd, Sunway Bhd (Sunway), Ahmad Zaki Resources Bhd and Naim Holdings Bhd.
“Therefore, we believe this will be the earnings catalyst to boost their construction order book which may keep them busy until 2020.”
M&A Securities also said it is positive on the recent development of the rail transit line (LRT 3) extension project as revealed in Budget 2015 and it expected that the development of this project could begin next year.
“Syarikat Prasarana Negara Bhd has completed the feasibility study on LRT3 covering 36km from Bandar Utama in Damansara to Klang, estimated to cost approximately RM9 billion and it is now waiting for approval from the Land Public Transport Commission (SPAD).
“Among the potential beneficiary for the propose LRT 3 project include Sunway, Malaysian Resources Corporation Bhd (MRCB), Trans Resources Corp, UEM Builders and Intria Bina which currently have secured major contract packages in the on-going RM7 billion Kelana Jaya and Ampang Lines LRT extension projects,” it explained.
Aside from that, the research team noted that the awards for the construction of Sections 1, 2, 6, 7, 10 and 11 of West Coast Expressway (WCE) worth RM2.2 billion is expected to be materialised soon through open tender.
It added, the construction works are set to begin by the fourth quarter of 2014 (4Q14) and the entire project will take about five years to complete.
As for the Refinery and Petrochemical Integrated Development (RAPID) project in Pengerang, Johor, M&A Securities said, it expects more large scale infrastructure works to be awarded soon.
“Despite the sluggish and murky oil price outlook, this mega plan has yet to be chopped off from Petroliam Nasional Bhd’s (Petronas) radar,” it added.
Among the railway related project which could provide the re-rating catalyst for construction players is KL-Singapore High Speed Rail (KL-Singapore HSR), M&A Securities pointed out.
“The 330km KL-Singapore HSR project may worth about RM30 billion to RM40 billion. According to the government sources, HSR project would consist of two services comprising of an express city-to-city service (connecting KL to Singapore directly) and a transit service,” it said.
It further explained, seven stations have been identified in Malaysia namely Kuala Lumpur, Putrajaya, Seremban, Ayer Keroh, Muar, Batu Pahat and Nusajaya.
It noted, Land Public Transport Commission (SPAD) has completed a feasibility study on the project and is now waiting for the final decision from Malaysian and Singaporean governments which expected to be announced in 2015.
Meanwhile, it noted that China‘s Premier, Li Keqiang has reiterated China‘s interest in participating in the KL-Singapore HSR on his recent meeting with Prime Minister Datuk Seri Najib Tun Razak in Beijing.
“This is within our expectation given that China has the longest HSR network in the world covering a distance of approximately 10,463KM, surpassing Spain (3,100KM) and Japan (2,664KM). China is also home to the world’s longest single line, Beijing-Guangzhou HSR which covers the distance of 2,298 km.
“Note that China started its HSR operation in 2007 and able to enhance its HSR development in shorter time period compared to the Japan‘s infamous HSR network, Shinkansen, which commenced operation back in 1964,” the research team said.
Overall, it pegged an ‘overweight’ call on Malaysia’s construction sector underpinned by the vigorous long-term outlook via mega infrastructure projects which will be strongly backed by the government and private sector.