The valuation of construction stocks are no longer compelling as the expected award of mega projects in the coming months have largely been factored into existing earnings model, said ECM Libra Investment Research.

'We remain 'neutral' on the sector with new job flows remaining patchy while the proposed mega projects were still under evaluation,' it said in report today.

ECM Libra said contract flow continued to come from Sabah and Sarawak, with Hock Seng Lee Bhd (HSL) and Bina Puri Holdings Bhd winning contracts amounting to RM179 million for infrastructure works and building construction in Tanjung Manis and Kuching respectively.

'As part of the Sarawak Corridor of Renewable Energy initiative, Sarawak has requested for RM800 million of federal funding for the construction of a sea port and to upgrade the airport at Tanjung Manis,' it said.

It said the port, which was expected to be sited near to the Rajang River mouth, has been allocated RM300 million while upgrading of the airport was expected to cost RM500 million.

'HSL is believed to be eyeing the projects, for which construction is targeted to begin early 2011,' it said.

The research house said its top pick was Sunway Holdings which was trading at undemanding forward price earnings of 7.6 times. -- Bernama