KUALA LUMPUR: Domestic contract awards in the construction sector totalled RM10.7bil in 1H17, declining 72% year-on-year.
HLIB Research noted that the steep fall was attributed to an exceptionally high base last year due to the award of the MRT2 underground works (RM15.5bil), DUKE3 (RM3.7bil) and Sarawak Pan Borneo Highway packages (RM3.2bil).
The research house said on Friday that domestic contract awards to listed contractors in the second quarter amounted to RM4.1bil, declining 39% on-quarter and 49% on-year.
“Sizable job wins were lacking during the quarter with only one contract exceeding RM500mil for the Bintulu Port supply base wharf.
“In comparison, contract awards in 1Q17 (RM6.6bil) and 4Q16 (RM6.8bil) were boosted by several MRT2 viaduct packages,” it said in a report.
Moving forward, the research house, which maintained its Overweight call on the sector, expects the flow of contract awards to pick up in 2H, aided by the rollout of LRT3 (RM9bil).
It said channel checks with contractors revealed that several tenders have been called and were undergoing evaluation.
“We expect a strong revival in job flows next year, driven by several mega rail projects.
“The significance of these mega rail projects to the construction sector should not be underestimated,” it said.
Gamuda is its top large cap construction pick as it is set to see earnings hit multi-year highs in FY18 and FY19, while for the small caps, the research house likes George Kent (Malaysia) and Pesona Metro Holdings as they both offer superior earnings growth and strong ROEs.
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