Construction sector poser


  • Construction
  • Tuesday, 03 Mar 2020

Affin Hwang Capital, in a report, said the elevated political uncertainties arising from the change in government and prime minister will continue to dampen sentiment on the construction sector.

PETALING JAYA: The local construction sector could experience delays in public-sector project awards following the recent change in government.

Affin Hwang Capital, in a report, said the elevated political uncertainties arising from the change in government and prime minister will continue to dampen sentiment on the construction sector.

“It is uncertain at this point if the open tender system to award public-sector projects practised by the previous government will continue under the new government.

“The change in the Works Minister could further delay the rollout of public-sector projects, depending on the level of experience of the new minister in this area and could lead to a possible review of projects.”

Affin Hwang Capital said there could possibly be more public-sector projects in Johor.

“As a former chief minister of Johor and Member of Parliament for Pagoh, we believe new Prime Minister Tan Sri Muhyiddin Yassin could favour the implementation of projects in Johor to strengthen his voter base.

“Implementation of some infrastructure projects, such as the Johor Bus Rapid Transit and Johor Baru-Singapore Rapid Transit System, could accelerate. Potential construction and concession company beneficiaries with operations in Johor include AME Elite Consortium Bhd, YTL Corp Bhd, Kimlun Corp Bhd and Ranhill Utilities.”

The research house, however, said there could possibly be delays in infrastructure projects in Penang.

“The implementation of the Penang Transport Master Plan (PTMP) could be adversely impacted by the change in government. Some components of the project, such as the Bayan Lepas LRT, rely on federal government-guaranteed bonds to fund the construction.

“The Penang state government has become an Opposition state and infrastructure spending for the state could be cut under the new government.

“Negative for Gamuda Bhd, which leads the SRS Consortium (the PTMP project delivery partner), if the project implementation is delayed due to lack of government support funds.”

Additionally, Affin Hwang Capital said there could possibly be more federal government funding for Sarawak projects.

“The implementation of Sarawak-based projects could accelerate, as Gabungan Parti Sarawak (GPS), which leads the state government, provided crucial support to Muhyiddin to become the new prime minister.

“Hence, there could be additional federal funding support for the development of infrastructure projects in Sarawak ahead of the next state election, which is due to be held by Sept 7,2021.”

The research house has reiterated an “underweight” call on the construction sector.

“Sunway Construction remains our top sector ‘buy’, given its ability to secure in-house and private-sector projects and being relatively less reliant on government jobs. “Our small-cap top buys AME (industrial properties continue to see good demand) and Taliworks Corp Bhd (high dividend yield) are among our small-cap top buys.

“Top sells are Gamuda and MRCB, given uncertainties in winning new contracts, ” it said.

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