INVESTORS hoping there would be outright sector beneficiaries for Malaysia’s largest stimulus package would have been disappointed. A large portion of the package were “rakyat centric” (rightly so) and targeted at reducing the burden of the people.
“The economic stimulus package of RM250bil benefits four million households and the SME sector. Everyone benefits from this second supplier budget. The biggest impact of this well-thought-out economic stimulus package is that it instills confidence of retail and institutional investors, ” says former investment banker Ian Yoong.
He adds that if the second supplementary budget had not been announced, the biggest casualty would have been the consumer sector. This economic stimulus package, therefore, assuage the concerns of the rakyat, mainly the B40 and to a lesser extent the M40.
Yoong adds that this economic stimulus package is sufficient for addressing the short-term impact of the economic slowdown brought about by Covid-19.
“In the unlikely event the adverse economic impact is prolonged to the fourth quarter, a third supplementary budget might be necessary, ” says Yoong.
Sectoral wise, perhaps the only two that are the beneficiaries and will see a flurry of activities are healthcare and infrastructure.
“For these sectors, quite a big amount is being channelled in. While the RM500mil being channelled to the healthcare sector is predominantly meant to fight the Covid-19 disease, there will still be an element of the multiplier effect, ” says Rakuten Trade Sdn Bhd vice-president of research Vincent Lau.(pic below)
“Meanwhile the RM2bil worth of infrastructure projects that starts in April is meaningful. This means that shovels will be hitting the construction sites next week and these workers will have money in their pockets.
The action of the government making investment and creating jobs gives confidence and hope for growth. This is a good message for the economy, ” adds Lau.
In the RM250bil stimulus package announced by Prime Minister Tan Sri Muhyiddin Yassin yesterday, another RM1bil will be channelled to the Health Ministry for the purchase of equipment and services to combat the Covid-19 virus. This will include getting services from the private healthcare sector.
Earlier on, some RM500mil had already been allocated.
While all eyes have been on the glove manufacturers, little attention has been given to the makers of health equipment and products, which in all honesty, have seen a similar rise in their demand.
“For example, companies like Nova Wellness Group Bhd and Apex Healthcare Bhd which sells supplements like Vitamin C, sanitizers and face masks, the demand for these products have also been through the roof, ” says one analyst.
Meanwhile equipment providers such as UWC Holdings Bhd and Supercomnet Technologies Bhd supplies devices and components for Covid-19 testing.
Earlier this week, hospital furniture manufacturer and provider LKL International Bhd saw its share price double in one week, as investors anticipated further contract wins for the company.
On March 25, LKL was awarded a contract for the supply of personal protective equipment to public hospitals in Sarawak for RM6.57mil.
Besides LKL, the other supplier of hospital equiment is BCM Alliance Bhd.
Meanwhile, the infrastructure sector will have some RM4bil worth of contracts. The first RM2bil were announced in the first stimulus package and will kick off in April.
This means that by April, construction sites will be back to being busy, and workers will be getting their wages.
These first batch of projects include infrastructure projects in the Felda area and others worth RM600mil, rehabilitation projects for poorly maintained schools in Sabah and Sarawak worth RM350mil and projects to rehabilitate houses for the rakyat at RM150mil.
The new batch of RM2bil contracts have been identified as a number of small projects such as improving roads, upgrading poor schools in Sabah and Sarawak, cleaning houses of worship and police stations, and improving tourism facilities.
These will benefit G1 to G4-class contractors, which are largely small and medium-sized contractors, including mostly bumiputera contractors under this category.
The government will also continue with the implementation of all projects allocated in the Budget 2020 including the East Coast Rail Link (ECRL) and the Mass Rapid Transit Line 2 (MRT2).
“There is nothing new and no new surprises on the government’s stance on the ECRL. This decision does not mean that ECRL progress will be accelerated. As it stands, the project is delayed due to land acquisition matters, which slows down final design and tender process, ” says CGS CIMB analyst Sharizan Rosely.
He adds that the ECRL was partially affected by the one month of MCO, as other non-essential works has stopped while tunnelling works continue. The ECRL is about 15% completed prior to the MCO.
The potential contenders of the ECRL within CIMB’s coverage, which have prequalified but have not indicated that they have submitted official tenders or have been called to submit tenders, include IJM Corp Bhd, Sunway Construction Bhd, MRCB Bhd and WCT Holdings Bhd.
The highly anticipated competitive tender is likely to also include other contractors namely TSR Capital Bhd, Ikhmas Jaya Group Bhd, Fajar Baru Holdings Bhd, Gadang Holdings Bhd, TRC Synergy Bhd, AZRB Bhd, Mitrajaya Holdings Bhd, HSS Engineers Bhd, Gabungan AQRS Bhd, George Kent (M) Bhd and Econpile Holdings Bhd.
“In our view, those are selected contractors with considerable rail track record in the past. We have initially estimated that the first phase award of the ECRL to be RM3bil to RM4bil in 2020, as not all sections will be ready for tender rollout. This value range has not changed, ” says Sharizan.
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