Sarawak theme seen as catalyst for construction sector with major infrastructure projects rollout

PETALING JAYA: The Sarawak theme is expected to be a catalyst for the construction sector as the state government plans to roll out major infrastructure projects to stimulate economic activity.

Kenanga Research said the sector will also be supported by the federal government’s intention to review the pipeline of construction jobs previously touted to be revived.

“It will probably take some time for the dust to settle as the new government gets down to work before any key policy announcements are made,” it said.

Sarawak has unveiled the state budget with plans to spend RM22 billion on infrastructure projects including the Second Trunk Road (RM6 billion), coastal road upgrades (RM5 billion), water grid programmes (RM2.8 billion), rural electrification projects (RM2.4 billion) and telco towers (RM1 billion).

“Timing-wise, it would probably make political sense to roll out these projects to stimulate economic activity ahead of the Sarawak state election, which must be held by September 2021,” said Kenanga Research.

The current state government is helmed by the ruling coalition Gabungan Parti Sarawak, a friendly party to the Perikatan Nasional-controlled federal government.

In the previous state election in 2016, the party with other component parties in the then ruling Barisan Nasional coalition won 72 of the 82 state seats to secure a comfortable margin of victory.

In its analysis of three of the previous state elections, the Kenanga Research concluded that there is no visible historical pattern for the individual stock’s performance in the run-up to election day.

“In our analysis, the most profitable investment period was six months leading to election date, with average returns of 6.3% in 2006, 7.6% in 2011 and 2.6% in 2016.”

However, the research house stated that it remains to be seen whether the new federal government (like its predecessor) will review existing and new major construction projects initially after they take office.

Among the high-profile infrastructure projects that have been earmarked to be revived include the RM3.2 billion Johor Baru-Singapore Rail Transit System with the finalisation of contract terms previously scheduled to be in April this year and the RM60 billion Kuala Lumpur-Singapore High Speed Rail which is supposed to be revisited by both countries in May 2020.

Other projects are the RM40 billion Mass Rapid Transit 3, earlier speculated to be considered for revival in the later part of this year as well as the RM32 billion Penang Transport Master Plan, with the project delivery partner agreement originally to be inked in Q1’20 following the previous federal government’s green light to guarantee the bond financing for the LRT component.

Kenanga Research maintains a neutral call for the construction sector with Gamuda as its top pick for large cap, while Hock Seng Lee Bhd is the choice for exposure to the rising construction activity in Sarawak.

source https://www.thesundaily.my/business/sarawak-theme-seen-as-catalyst-for-construction-sector-with-major-infrastructure-projects-rollout-FC2114986