MIDF remains positive on construction sector, sees better year for contractors 

08 May 2023 11:40am
Image for illustrative purposes only. - FILE PIX
Image for illustrative purposes only. - FILE PIX

KUALA LUMPUR - MIDF Research remains positive on the construction sector following the announcement of additional funds by the federal government for Penang to carry out its light rail transit (LRT) project, among other developments.

However, it said more clarity is needed as Prime Minister Datuk Seri Anwar Ibrahim will discuss the matter within the next fortnight with the state government.

The research house noted that the federal government has agreed for the first route of the Penang LRT to be from Bayan Lepas to Komtar, with the implementation and other matters to be detailed later.

"Now that the federal government (is funding) the Penang LRT, the state government is considering scaling down the Penang South Islands (PSI) project or postponing it.

"In light of these new developments, these are some matters that will need to be sorted out between both the federal and state government, and also its project delivery partner SRS Consortium Sdn Bhd, of which 60 per cent is held by Gamuda and the remaining 40 per cent held equally by Loh Phoy Yen Holdings Sdn Bhd and Ideal Property Development Sdn Bhd," it said in a research note.

MIDF said its positive view on the sector is also supported by the allocation of RM1.2 billion for socioeconomic development in Negeri Sembilan and talks with potential partners on the feasibility of the RM60 billion High Speed Rail (HSR) by Malaysian firms.

The RM1.2 billion allocation would include RM600 million for an exit road from a proposed new toll to the Seremban Central Ring Road, RM280 million for the construction of Education Ministry facilities, and RM160 million for a road and a bridge to link Bukit Pelandok and Sungai Pelek.

The research firm said new flows on basic infrastructure jobs and mega infrastructure projects were sure to jolt excitement in the construction sector which has been rather muted in the past years.

"We expect the year 2023 to be a better year for contractors, especially given the boost by Budget 2023, with a slew of infrastructure works and public utilities that would translate to stronger job flows this year.

"We still think that the highlight this year will be the rollout of Mass Rapid Transit 3 (MRT3), which has been delayed since December 2022 due to a review by the government to bring the cost down from RM50 billion to RM45 billion," it said.

MIDF said its preferred stocks are still those with robust balance sheets and considerable overseas presence, such as Gamuda with a "buy” call and target price of RM5.04, Sunway Construction (buy, TP: RM2.00), and IJM Corp (buy, TP: RM1.90). - BERNAMA

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