PETALING JAYA: The government’s plan to take over the Pan Borneo Highway in East Malaysia is expected to have limited impact on contractors already working on the Sarawak portion of the project.
However, the Sabah portion of the 706km highway will likely see further delay, according to Kenanga Research.
“We believe it would have minimal impact to the existing work package contractors for Pan Borneo Sarawak, as most of the work packages are awarded and progressing well but it could further impact the timeline for Pan Borneo Sabah, as some of the work packages are not awarded yet,” the brokerage said in a report.
It said this in response to a news report that the Federal government would take over Pan Borneo from the existing project delivery partner.
Kenanga Research noted that Pan Borneo Sarawak was progressing well, with 35% of the project being completed to-date. The brokerage deemed that as encouraging for a mega project with limited resources and logistic challenges.
Conversely, it noted that the Pan Borneo Sabah, which originally offered 35 work packages in total, could see delay in the execution due to lingering issues such as land acquisitions, relocations and work coordination.
Following its recent study trip to Sabah and Sarawak and meeting with companies there, Kenanga Research said it observed there was optimism and excitement for Sarawak-based companies such as Sarawak Energy Bhd, BINTULU PORT HOLDINGS BHD (BPHB), Hock Seng Lee Bhd (HSL), CAHYA MATA SARAWAK BHD (CMS), Naim Holdings Bhd and KKB Engineering Bhd.
“An interesting observation we gathered during our trip to Sarawak is the state government’s support in growing their local companies.
“Hence, we believe local Sarawak players like Sarawak Energy, BPHB, HSL, CMS, Naim and KKB could benefit from the state government’s effort in improving the livelihood of Sarawakians,” Kenanga Research explained.
Citing the state government’s allocation of RM11bil for infrastructure works such as coastal highway, water supply and electricity connectivity projects over the next two years, the brokerage said Sarawak contractors were already all geared up to participate in the open tender for those projects.
“Many contractors are vying for the impending awards from the state-funded mega infrastructure project, given softer construction landscape in the peninsular, while early work packages are expected to be awarded in coming weeks,” Kenanga Research said.
“We think Sarawak plays within our coverage such as HSL is poised to ride on the state mega infrastructure project. We think investors should accumulate on price weakness, as we anticipate more news flow and clarity on the projects award in the first half of 2019 to perk up positive sentiment and share price, going forward,” it added.
As for Sabah-based companies, Kenanga Research had mixed feelings after a site visit to the state.
“While we see strong development potential in the tourism sector that would benefit SURIA CAPITAL HOLDINGS BHD and Gabungan AQRS Bhd’s development in the Jesselton area, which is crowded with Chinese tourists, the development of infrastructure such as road and ports in Sabah remains challenging, as it requires much focus, attention and assistance from relevant parties,” the brokerage said.
Kenanga Research said the potential takeover of the Pan Borneo Highway by the federal government had created some uncertainties in the market, especially for Sabah players.
Thus far, Pan Borneo Sabah had only achieved progress of 11% for the 12 ongoing work packages that was awarded to local contractors such as Pembinaan Azam Jaya Sdn Bhd, Akif Jaya Sdn Bhd, Perwira Progresif Construction Sdn Bhd and Pembinaan Kekal Mewah Sdn Bhd.