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Author: savemalaysia   |   Latest post: Tue, 1 Dec 2020, 6:59 PM


Construction stocks lower

Author:   |    Publish date:

PETALING JAYA: Construction stocks were mostly lower yesterday, in spite of news that a portion of the East Coast Rail Link (ECRL) had received approval to commence construction works.

At 5pm yesterday, shares of MALAYSIAN RESOURCES CORP Bhd were down two sen to 54 sen, WCT Holdings Bhd slipped 0.5 sen to 58 sen, Ekovest Bhd ended five sen lower to 56 sen, MUHIBBAH ENGINEERING (M) BHD closed 2.5 sen down to 96 sen and George Kent (Malaysia) Bhd dropped 2% to 71 sen.

An analyst said investors were taking profit, considering that the Bursa Malaysia Construction Index has been seeing a steady uptrend this year.

“Year-to-date, however, the Bursa Malaysia Construction Index has surged more than 20%, ” he said.

On Monday, it was announced that the ECRL project had received approval to start construction work for one-third of the project (known as section A), comprising 210.4km from Kota Baru to Dungun.

In a statement, Malaysia Rail Link Sdn Bhd - the project and asset owner of ECRL - said it has received the approval from the Land Public Transport Agency in a letter dated May 14.

CGS-CIMB in a report yesterday said initial tenders will focus on advanced jobs, rather than civil works.

“We gather that once the tenders kick off in the coming weeks, they will focus on preparatory works and earthworks, which typically are small/medium value contracts. We see the approval for section A as timely.

“The progress of the ECRL was affected by the stop work order, which was recently lifted, and this should allow the project to proceed beyond its 16% completion rate prior to the movement control order (MCO), ” it said in a research report yesterday.

To tackle the rise in Covid-19 infections in the country, the government implemented the MCO on March 18. On May 4, a conditional movement control order (CMCO) was enforced to allow businesses to re-open to help the economy recover. The CMCO has been extended to June 9.

CGS-CIMB said further delays are likely for section B’s civil works phase.

“We retain our view that larger contractors will remain focused on the upcoming subcontract tenders for section B instead of section A. We believe the tenders for section A will prioritise smaller unlisted players, including bumiputra contractors.

“We had earlier estimated the civil works value of section A to be RM8.7bil , of which 40% share to local subcontractors works out to RM3.5bil.

“For section B, we arrived at an estimated civil works value of RM9.2bil and the 40% share to local subcontractors amounted to RM3.7bil.”

CGS-CIMB said the delays in the tenders for section B since end-2019 can be attributed to, among other factors, the land acquisition process that was not totally resolved prior to project suspension in 2018.

“We believe civil works sub-contract tenders for section B may be launched in the fourth quarter of 2020 at the earliest, as it should make way for the section A tender stage.”



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