The construction and building material sectors appear to be prime beneficiaries of the government's push to accelerate infrastructure spending and urban renewal under the Budget 2011.

Gamuda may be awarded a significant portion of the Mass Rapid Transit (MRT) project, given its ownership of the concept plan, Amresearch said in its Budget 2011 commentary.

"Nonetheless, we are advocating a switch from Gamuda to IJM because the market may have already factored in the project," the research house said.

"IJM's value propositions are more compelling. It is well positioned to bid for the MRT jobs while having an excellent track record in constructing Grade A office buildings and luxurious condominiums that may characterise the KLFD, Warisan Merdeka and 1MDB projects," it added.

The RM40 billion Mass Rapid Transit (MRT) project in the Klang Valley will be implemented beginning 2011.

The next leg of play may gravitate towards steel and cement companies.

"We prefer the former. Cement company LaFarge has had a strong rally and at a forward PE of 16x, the stock is priced to perfection," AmResearch said.

Steel prices have been bouncing along the bottom for sometime now.

Checks with industry sources, according to AmResearch, revealed that the MRT project may require at least 10x more steel bars than the SMART tunnel, and the steel requirements are front-loaded, pointing towards a strong inflexion point in domestic demand.

"Ann Joo is our top pick. Its capacity expansion appears timely," Amresearch said.

Budget 2011 proposes several incentives to increase home-ownership among the lower-income households.

"We do not think the impact is too significant," it said.

"Most importantly, the much-talked about cap on loan-to-value for the purchase of third property was conspicuously absent and the Real Property Gains Tax regime remains at status quo," Amresearch noted.

The proposed creation of a syariah-compliant Bumiputra Property Trust Scheme this year, AmResearch said, should also widen demand for investment properties.

The Budget 2011 also made a proposal for the implementation of the B5 programme (Blending of Biofuels with Petroleum Diesel) on a mandatory basis in some states by June of next year.

The price subsidy is unclear but the implementation of this policy may increase CPO demand by about 500,000 tonnes - one third of the country's inventory level - giving prices an added push.

"This, together with weakness in the US dollar, may further underpin the CPO price," it explained.

The Sarawak theme is embedded in Budget 2011 where the focus is on enhancing basic infrastructure, with a sizable RM6.9 billion to be allocated to develop water, electricity supply and rural roads.

The government is also planning to construct a 300-MW gas power plant in Kimanis, Sabah.

"Furthermore, we expect the oil and gas development to be fast-tracked as evidenced by the recent award of the Sabah Oil & Gas Terminal (SOGT) job to Samsung and Naim Holdings," AmResearch said.

It is also putting the FBM KLCI fair value of 1,380 for this year under review, with an upside bias. -- Bernama