HIGH EXPECTATIONS: Looking ahead, Alliance Research has set a domestic job award target of RM18 billion for this year, hinging heavily on the assumption that the ruling government remains in power post 13GE which must be held latest by May. — Bernama photo
KUCHING: A record year was seen in the construction sector with domestic contracts for the fourth quarter of the year 2012 (4Q12) coming in at RM3.2 billion, bringing the full year sum to a record RM27.9 billion.
Excluding Mass Rapid Transit (MRT) tunnelling job, domestic job awards of RM19.6 billion was well within the full year target range of RM18 to RM20 billion set by Alliance Research Sdn Bhd (Alliance Research).
The firm in its research report said, “Domestic contract awards for 4Q12 came in at RM3.2 billion which is up 43.1 per cent year-on-year.
On a quarterly basis however, this translated to a decline of 42.5 per cent, which was inline with our expectations.
“In our previous third quarter report, we highlighted that 4Q will likely see a quarter-on-quarter (q-o-q) contraction as most of the MRT packages were dished out between 1Q and 3Q.” It was still a record year nonetheless for the construction sector, highlighted the research firm, representing a robust 135.4 per cent y-o-y growth and marking a record show in domestic job awards.
For the full year 2012, domestic contracts totalled RM27.9 billion, backed by the sizable RM8.3 billion MRT tunnelling works awarded in the second quarter.
“If the MRT tunnelling job was removed, domestic contracts would amount to RM19.6 billion, which was still a healthy 65.6 per cent y-o-y growth,” it added.
“At RM19.6 billion, domestic contracts (excluding MRT tunnelling) were within our 2012 target range of RM18 to RM20 billion.” Looking ahead, Alliance Research has set a domestic job award target of RM18 billion for this year, hinging heavily on the assumption that the ruling government remains in power post 13th General Elections (13GE) which must be held latest by May.
“With the concession agreement for the RM5.2 billion West Coast Expressway (WCE) recently signed, this could potentially be the largest job for 2013.
Table of construction peers and comparison, (SOURCE: Alliance Research, Bloomberg)
We expect awards for some of the packages to materialise in 2Q13.” Other potential sizable jobs include the Southern Double Track (RM8 billion), Tun Razak Exchange earthworks (RM1 billion), RAPID earthworks (RM500 million), KIDEX Highway (RM1 billion) and 2 upcoming coal fired plants totalling 3,000MW.
Meanwhile, Alliance Research noted that foreign contract awards for 4Q12 stood at RM1.1 billion largely made up of the RM920 million water project in Oman won by MMC Corp Bhd (via Malakoff).
“For the full year 2012, foreign jobs came in at RM5 billion (an increase of 68 per cent y-o-y) and made up 15.3 per cent of total contract awards,” it said.
“We do not expect a significant increase in the proportion of foreign contracts for 2013 as most contractors continue to focus their resources domestically.”
Aside a record showing of domestic job awards, construction GDP growth has also been very strong with 3Q12 at 18.3 per cent, noted the firm.
“As such, we expect full year 2012 growth to come in at 19 per cent and forecast 2013 growth at 11.5 per cent.”
In conclusion, Alliance Research maintained an overweight stance on the sector, believing that a rerating will set in once 13GE is done and dusted.