Jul 12, 2012

Malaysia Construction Sector 3Q12 Outlook

More than RM20b infrastructure jobs to be awarded

•  We believe there will be more contract awards flowing in 2H12, especially from transport infrastructure-related and mixed property development projects.
•  Contracts that will be closely-watched include the remaining packages of MRT1 Sungai Buloh – Kajang Line, West Coast Expressway and Gemas-JB Electrified Double Tracking Project.
•  We estimate that these contracts award, if materialized in 2H12, could be worth as much as RM21.4b,
•  Moreover, mixed development projects namely, KL International Financial
District, as well as Sungai Buloh Rubber Research Institute (RRI) also augur well for construction players. We gather that the initial phase of the KLIFD worth of RM1.0–RM1.5b is expected to kick off in July 2012.
•  Election risk has been over-imputed in the 2Q12, which sent the KL Construction Index down by -0.53%ytd against KLCI Index of +4.81%ytd. Hence, we view this as an opportunity for investors to accumulate.