PETALING JAYA: Building material counters are expected to be the next thematic play on the local equity market, boosted by expectations that the government would revive the East Coast Rail Link (ECRL) project.
Seen as the beneficiaries of the positive spillover effects if the ECRL project is resumed, several cement and steel players already saw their share prices rallying yesterday after Finance Minister Lim Guan Eng said the final decision on the rail project would be finalised soon.
Among the building material stocks that surged the most were cement counters Tasek Corp Bhd and Lafarge Malaysia Bhd .
Tasek shares rose 47 sen, or 10%, to close at RM5.17 on a volume of 76,000 shares, while Lafarge shares gained 35 sen, or 17.5%, to RM2.35 after 4.27 million units changed hands yesterday.
In terms of price on the overall market, Tasek was the second-highest gainer after Nestle (M) Bhd , while Lafarge was fourth after Carlsberg Brewery Malaysia Bhd .
Meanwhile, other building material counters that also gained were steel-makers Lion Industries Corp Bhd (up 4.5 sen to 56.5 sen) and Ann Joo Resources Bhd (up three sen to RM1.59); and cement manufacturer Hume Industries Bhd (up 4.5 sen to 78 sen).
According to an analyst, the potential revival of the ECRL project is a major catalyst to not only local construction players, but also to building material producers as well amid the slowdown in mega infrastructure and property projects in the country.
“These two (sectors) go hand in hand... with jobs coming in, demand for materials will also increase,” the analyst with a local brokerage said.
“There is a strong likelihood that the Malaysian government would make a positive decision to revive the ECRL project; and investors are banking on this. Hence, following the recent ‘mini rally’ of construction stocks, building materials are now also in play,” he explained.
Citing discounts offered by the Chinese government for the ECRL project, Lim on Thursday reiterated hope that the decision on the project would be finalised soon.
“I think the prime minister (Tun Dr Mahathir Mohamad) had mentioned some price reduction and we are still discussing and hope these discussions can be carried out quickly, hopefully in time for Dr Mahathir’s visit to China in April,” he was quoted as saying by Bernama.
The ECRL project comes at a hefty price tag of RM55bil. But the prime minister had previously announced that the project could be carried out at a cost of RM35bil.
The 688-km rail link, if built, would connect Port Klang in Selangor and Pengkalan Kubor in Kelantan.
The Malaysian government has thus far paid RM200mil in interest to the main contractor of the ECRL, with the interest payment based on the RM55bil loan taken from China Communications Construction Company as the main contractor of the project.
UOB Kay Hian in its report last month named Gabungan AQRS Bhd as one of the key beneficiaries of the potential revival of the ECRL.
It noted that AQRS had previously tendered for three packages along the stretch in Kuantan, Pahang, with a tender value of RM2.5bil.
Other potential winners, the brokerage said, would include Sunway Construction Group Bhd , IJM Corp Bhd , Malaysian Resources Corp Bhd and WCT Holdings Bhd , given their track records for the construction of rail-work jobs.
As for building material companies, if the project still largely involved elevated structures, steel companies such as Ann Joo would be a key beneficiary, UOB Kay Hian said.
Otherwise, cement companies such as Lafarge, YTL Cement Bhd and Hume Industries would benefit from sub-structure works, while other players such as Prestar Resources Bhd would benefit from guardrail works as the group commands a 50% market share in the local guardrail business.