Thursday, March 21

Construction sector to see more contract awards in the near future

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KUCHING: Malaysia’s construction sector will likely see more contract awards in the near future as major infrastructure projects kick into high gear next year, analysts say.

RHB Research Sdn Bhd (RHB Research) in its recent strategy report for 2017, highlighted that there are enough outstanding jobs to be awarded in the short and medium term.

“Aside from the remaining packages for mass rail transit line 2 (MRT2) and Pan Borneo highway (Sarawak), there are still a few more projects in the pipeline scheduled to be awarded in the coming months through the first half of 2017 (1H17).

“All eyes are on the light rail transit line 3 (LRT3) and Pan Borneo highway (Sabah),” it said.

Additionally, RHB Research pointed out that there are still a few more work packages from the West Coast Expressway (WCE), the Refinery and Petrochemical Integrated Development (RAPID) project, and long awaited sub-contracting works for the Gemas-Johor Bahru electrified double tracking (EDT) project.

“There are also several mega projects in the early stages of construction and planning, such as the Tun Razak exchange (TRX) and Bukit Bintang city centre (BBCC) projects.

“Award for these projects can be expected in the coming months, and possibly extend to the next few years given that some of the mega development projects may take decades to be fully implemented,” it added.

Meanwhile, the research arm of Maybank Investment Bank Bhd (Maybank IB Research) believed that China’s interest in investing on infrastructural and property projects Malaysia could add a new dimension to the country’s construction sector.

“China’s ‘One Belt One Road’ initiative will continue to put Malaysia in the limelight of Chinese investments due to Malaysia’s strategic position on the Straits of Melaka.

“With the ability to provide attractive financing packages, we could potentially see Chinese contractors being involved in the major rail projects such as the KL-SG high speed rail, Gemas-Johor Bahru double track rail and the East Coast Rail Line.”

“However, we believe the local content requirement for major infrastructure projects would still be preserved,” it said.

Beyond 2017, RHB Research noted that while there are concerns on the availability of contracts for 2018, it believed that there remained many public and private projects in the pipeline, such as the high speed rail (HSR) project between Kuala Lumpur and Singapore, and works related to the Penang transport master plan (PTMP).

Aside from that, it said, based on a report by Bangkok Post, Thailand’s Transport Minister Arkhom Termpittayapaisith has indicated Thailand’s interest in the ambitious initiative to build a new HSR system linking Bangkok and Kuala Lumpur, which would complete the 1,400km journey in six hours.

“The PTMP may enter into the contract award stage, whilst MRT line 3 (MRT3) may be in the planning stage by 2018, in our view. We may also finally see a revival of the property market by then, with more new launches, as well as the Bandar Malaysia development gradually taking off,” RHB Research opined.

All in, it pegged an ‘overweight’ recommendation on the sector while Maybank IB Research maintained its ‘positive’ call on the sector.

Maybank IB Research said, “Infrastructure job awards will continue to roll out in 2017 from several major infrastructure projects – KVLRT 3, Gemas-JB double track rail, and Pan Borneo Sabah – presenting opportunities for sizeable construction orderbook replenishment.

“Malaysia’s strategic position within the 21st Century Silk Road under the OBOR initiative could also lead to increasing investments into the infrastructure sector, injecting further optimism into the sector.

“We believe local contractors will continue to benefit as local content for the key infrastructure projects would be preserved.”