Construction seen remaining tepid in H2

CGS-CIMB said this in a report, citing Real Estate and Housing Developers Association (REHDA) president Datuk Soam Heng Choon (pic) who spoke to construction analysts via a recent webinar.

PETALING JAYA: The fundamentals of the construction sector will remain weak in the second half of this year as only about 25% of construction activity has been activated, post movement control order (MCO).

CGS-CIMB said this in a report, citing Real Estate and Housing Developers Association (REHDA) president Datuk Soam Heng Choon who spoke to construction analysts via a recent webinar.

“The unexpectedly slow resumption of works on sites has been the result of bottlenecks/constraints in complying with Covid-19 screening for all construction workers, ” the research house said.

Quoting Soam, it said that a full normalisation of sector activities was therefore unlikely in the second half of this year.

“This would therefore suggest that from almost zero progress billings/revenue in the second quarter, contractors’ revenue run-rates would still be weak in the third and fourth quarters.”

Meanwhile, CGS-CIMB said that while the Covid-19 Temporary Measures Act was likely to be passed in the upcoming Parliament seating in July, providing contractual/legal relief for projects disrupted by the MCO, the research house was also on the watch for potential new developments in the rail space in the second half of this year.

“We remain optimistic of a pick-up in high-speed rail or HSR newsflow ahead of the revised end-2020 review deadline, while signs of a potential review of mass rapid transit or MRT 3 plans in the fourth quarter of this year are still lacking, but they remain a possibility, ” the research house said.

It added that HSR plays could make a comeback should it be included in the 12th Malaysia Plan, injecting fresh re-rating catalysts for rail stocks.

YTL Corp remains its top HSR pick. The house has maintained its “neutral” call on the construction sector as a whole, saying that upside risks include HSR/MRT 3 newsflow while downside risks include delays in the details of the recovery plans for the overall construction sector.

Earlier this month, Kenanga Research told clients in a report that it liked the construction sector because it “remains the most effective conduit for the government to unleash their fiscal stimulus which boasts high multiplier effect - given the huge supply chain.”

The construction sector will not be left out in a plan towards recovery, it said.

“In fact, fiscal pump priming will be the impetus for a speedy economic recovery.

“Case in point, during the 1998 Asian Financial Crisis, construction of infrastructure was given the biggest priority in the 1999 budget, ” the brokerage said.

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