Small, medium-sized builders remain upbeat


  • Business
  • Tuesday, 24 Feb 2004

BY KATHY FONG

THERE may be growing concern that large companies in the construction sector will find it tough to secure new jobs, but it will not be wishful thinking on the part of the medium and small companies to expect their order books to exceed RM1bil this year. 

The confidence of these second-tier construction companies, such as Crest Builder Holdings Bhd and Hock Seng Lee Bhd, is mainly underpinned by small-scale public sector jobs. 

Apart from public sector contracts, some are also exploring opportunities outside Malaysia. 

“The Federal government has indicated its desire for a balanced budget by 2005, indicating reduced development expenditure going forward. Hence, there are expectations that there would be fewer public sector jobs going forward,'' said PJI Holdings Bhd operations director Lee Peng Kuan. 

“However, that does not mean that the award of jobs has stopped.” 

Crest Builder managing director Yong Soon Chow concurred, saying that there were still many projects available, most of them in the RM50mil to RM200mil range. “The switch in priority in government projects has created opportunities for the smaller construction firms like Crest Builder.” 

Hock Seng Lee corporate manager Sonja Gan said the company, which already had some RM900mil projects in hand, did not expect any slowdown in public jobs. 

In fact, she pointed out, there had been an increase in allocation for infrastructure development in Sarawak. The Federal government has budgeted RM5.5bil for infrastructure spending in the state this year alone, compared with about RM8.1bil over the last three years. 

Among government projects that have been dished out since December are Muhibbah Engineering Bhd's RM74mil contract to build a general cargo wharf at Bintulu Port and a RM223mil bridge construction project in Johor Baru; and Hock Seng Lee's RM102mil contract to design and build a deep sea fishing port in Tanjung Manis, Sarawak. 

Putrajaya, part of the Multimedia Super Corridor, appears to be a critical area for construction activities. 

It is believed that Putrajaya Holdings Sdn Bhd would open at least three parcels of land to development this year. A large portion of the development activities in Putrajaya will be construction of residential units, including linked houses and apartments, for civil servants.  

“Some of these projects are already under open tender,'' a source close to Putrajaya Holdings said, adding that the value of these contracts are mostly less than RM100mil each. 

The bidding for projects in Putrajaya has always been competitive because Putrajaya Holdings is a good paymaster, industry players say; and the slowdown in public projects will make the competition for contracts in Putrajaya even stiffer now. 

The latest projects in Putrajaya include TSR Capital Bhd’s RM73mil contract to build government apartments; Road Builder (M) Holdings Bhd's RM49.2mil superstructure work for the Alam Warisan project; PJI Holdings' RM40mil mechanical and engineering (M&E) jobs for the same project; and Crest Builder Bhd's RM92mil contract for the construction of 632 government apartment units. 

Lee of PJI Holdings noted that the government focused more on medium-sized projects that had a meaningful multiplier effect across the country. 

These included social infrastructure such as schools, hospitals, and water supply and sewerage projects.  

“PJI Holdings, as a specialist M&E contractor, is exposed to such contracts.  

“Also, the development of the Federal administrative centre, Putrajaya, is ongoing, and contracts are still being awarded,'' he told StarBiz. PJI's order book currently stands at about RM700mil. 

Besides, water- and sewerage-related jobs – especially water pipe replacement in several states – are also expected to be another priority for the government.  

Hence, this could be a critical area that would stimulate growth in the local construction sector, said analysts.  

The government has raised the allocation for the water supply and sewerage sub-sector by 84% to RM1.8bil per year for the current, and next, year – up from an average of RM1bil per year from 2001 to 2003. 

However, no public water-related project has been awarded since the federal government privatised water supply in Selangor and the Federal Territory last September.  

Industry players observed that the rather slow pace in water-related jobs could be due to funding, it will cost the government quite a fair bit.  

Furthermore, certain issues would need to be resolved before the Federal government can take over the management of water supply from the state governments, they noted.  

Meanwhile, companies hoping to secure these contracts, worth billions of ringgit, will have to remain patient.  

These water-related contracts could be the tonic in reviving the construction sector. 

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