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Author: savemalaysia   |   Latest post: Sun, 29 Nov 2020, 9:16 AM


Construction stocks continue upward trend

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PETALING JAYA: Construction stocks ended mostly higher, in line with regional markets. The Bursa Malaysia Construction Index has risen 3% over the past one month.

The index has been steadily growing more than 25% since March 23.

At 5pm yesterday, shares of SUNWAY CONSTRUCTION GROUP BHD was up two sen to 1.67, MALAYSIAN RESOURCES CORP Bhd inched up one sen to 46 sen, GAMUDA BHD rose three sen to RM3.08 and WCT Holdings Bhd also closed 1.16% higher at 44 sen.

Other constructions stocks that ended higher include Ekovest Bhd, which ended one sen higher at 47 sen, MUHIBBAH ENGINEERING (M) BHD (pic below)which closed 12 sen up to RM1 and George Kent (Malaysia) Bhd rose 3.5 sen to 70 sen.

Year-to-date, the Bursa Malaysia Construction Index has fallen 25%. The movement control order (MCO), which was implemented on March 18 to stop the spread of the Covid-19 outbreak, has put a damper on businesses across numerous sectors, including construction players.

Hong Leong Investment Bank (HLIB) Research in a recent report said the number of infrastructure rollouts in the first quarter of 2020 was “a major disappointment.”

“Broadly speaking, project rollouts may have been dragged by the seismic shifts in Malaysia’s political landscape and nationwide implementation of MCO could spark further delays to the original timeline.

“Tender progress for East Coast Rail Line (ECRL) might have stumbled as land acquisition has not been up to speed. Nevertheless, we gather there is some progress as issuance of sukuk facility to finance the ECRL is in the works.”

The research house added that limited financing options (initially exploring contractor financing and loan facility options) for the reclamation may diminish even further.

“We think that contractors with larger balance sheet capacity (tends to be diversified contractors) are hit on multiple angles from Covid-19 (balance sheet to deteriorate) effectively eliminating the contractor financing option.

“Without meaningful progress in firming up a funding structure for reclamation works, other parts of the Penang Transport Master Plan may not move.”

HLIB Research however said that the first quarter of 2020 did see some notable contracts being awarded.

“Some of the sizable contract wins in the first quarter include Pavillion Damansara Heights’ Phase 2 to WCT ; Aspen Vision City, Penang to Kerjaya Prospek and TRX Residences to IJM Corp .”

Overall, HLIB Research is maintaining a “neutral” outlook for the local construction sector.

“Prospects for the sector looks fairly muted due to earnings risks from weaker progress billings and cash flow pressure. Additional sector uncertainty emanates from delays in project rollout owing to the changes in political landscape.

“For now, we maintain “neutral” due to the already steep correction in the construction index.”

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Related Stocks

Chart Stock Name Last Change Volume 
SUNCON 1.90 -0.02 (1.04%) 91,900 
MRCB 0.44 -0.01 (2.22%) 4,363,800 
GAMUDA 3.67 0.00 (0.00%) 2,558,100 
WCT 0.435 +0.015 (3.57%) 9,656,200 
MUHIBAH 1.03 +0.03 (3.00%) 6,365,600 

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