PETALING JAYA: The extension of the movement control order (MCO) is a negative development for the construction sector’s earnings due to no contribution to revenue as overheads continue to run, thereby compressing profit margins, according to PublicInvest Research.
“There may also be heightened uncertainties post-MCO in relation to workers that may or may not return, or smaller subcontractors that have gone out of business given the current challenging period,” it said in a report.
The research house understands that certain critical works, which include tunnelling jobs, will be exempted from the freeze order due to safety reasons and on that Gamuda Bhd’s MRT 2 tunnelling works will continue.
Amid the current global economic slowdown and lower crude oil prices, it expects to see delays in the rollout of new contract awards given the constraints on the government’s coffers.
“It is likely to reduce the development expenditure, with the allocation reprioritised towards the most directly-affected sectors as well as the implementation of measures to help the people displaced by the Covid-19 pandemic.”
“The anticipated contract award of big projects this year, namely the East Coast Rail Link and JB-Singapore Rapid Transit System, may see further delays in the assessments on structure, alignment, concession agreement, tender process etc,” it said.
PublicInvest Research has trimmed earning projections for the firms under its coverage between 3.2% and 8.8% to reflect the MCO and lower order book replenishment target for this year.
source https://www.thesundaily.my/business/mco-extension-likely-to-crimp-construction-sector-s-profit-margins-XJ2193707
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