Lifting of stop-work order a short-term reprieve for construction players

PETALING JAYA: The lifting of the stop-work order for construction players during the extension of the movement control order (MCO) from April 14 to 28, will have a positive knee-jerk reaction for companies’ share prices, according to a note from CGS-CIMB Research.

It said the resumption of works, albeit not on par with pre-MCO level of billings, suggests a less severe negative impact of the MCO on earnings. The lifting of the stop-work order will be done in stages on condition of strict compliance to safety relating to Covid-19.

“We are positive on the decision to allow construction works to resume following the one month loss of billings brought about by MCO phases 1 and 2. This will help arrest cash flow issues and mitigate a worst-case risk of potential losses in the event the stop work order is prolonged.

“Progress billings should pick up at a slower rate due to the disruption in the building material supply chain and additional construction site restrictions during MCO phase 3,” it said.

Other major projects that will benefit from this news include the East Coast Rail Link (ECRL), and other ongoing major infra projects, including MRT 2 and LRT 3, which are largely undertaken by major rail contractors.

Major road and highway projects should restart, including the Pan Borneo Highway, the Sungai Besi Ulu Kelang Elevated (SUKE) highway and the Damansara-Shah Alam Elevated Expressway.

The research house is maintaining its neutral stance on the sector, with a short-term reprieve for the share prices of IJM Corp Bhd, Malaysian Resources Corp Bhd, Sunway Bhd and YTL Corp Bhd.

According to the MCO guidelines, the categories of construction works that are allowed to resume reveal broader-based coverage of various scopes of works that mainly apply to smaller scale construction works undertaken by a mix of listed and unlisted smaller/medium-sized main contractors.

The categories also extend to construction projects that are at lower levels of physical completion (prior to major civil works) involving site maintenance, preparation and slope works. Underground tunnelling works are also allowed to proceed.

Consideration will be given to projects that are currently at 90% (or more) physical completion.

source https://www.thesundaily.my/business/lifting-of-stop-work-order-a-short-term-reprieve-for-construction-players-CB2254206