Firing of powerplant is not that vital compared too when it will starts delivering earnings

STILL NO POWER

Maintain Neutral but revised our RM2.25 TP to RM1.80, which is pegged at 20% discount to its NTA. Near term, the commissioning of the power plant will be positive but we believe the stock performance will be capped until it delivers on earnings.

public invest research

http://klse.i3investor.com/blogs/PublicInvest/69370.jsp

1H15,,,,FIRST HALF OF 2015,,,,JAN TO JUN

MUDAJAYA shooting up

1H15

on mudajaya from the above report----------Commercial operations of the 1,440MW coal-fired power plant is on
track to start in 1H15

they talk a lot on MUHIBBAH AND BENALEC...............

Narrowing of trading discounts to RNAV underpinned by
sector catalysts
Contractors under our coverage are trading at a 25-59% discount to RNAV. We
expect the sector to steadily rerate in the coming months, but we expect
Gamuda and Muhibbah to outperform the rest due to 1) more visibility in terms
of order book growth potential, and 2) new opportunities domestically beyond
existing tender books. Following the fall in share prices in late 2014, on average,
share prices of contractors under our coverage are trading at 10% below their
52-week highs.

VALUATION AND RECOMMENDATION
Maintain Overweight
We conclude that 2015 should continue to offer bright prospects for contractors.
Our analysis of major jobs shows clearly how various project statuses are
nearing the award stage and could recover in term of newsflow going into 2H15.
We argue that the fall in share prices of contractors in late 2014 have mostly
priced in fears from the declining oil price. Now that the risk of a potential cut in
Budget 2015 has somewhat diminished, investors should be selective and
position themselves in stocks which offer strong order book growth and stocks
that have been oversold. Taking our cue from the unchanged RM49bn
development expenditure and the government's focus on public transport infra,
we believe a negative scenario of deferment of projects in light of the lower oil
price should not be overplayed. This is also backed by the private sector jobs,
which in terms of value, account for about 60% of major domestic jobs in the
next two years.
We expect sentiment on the sector to gradually recover following the knee-jerk
fall in share prices late last year. We continue to like Gamuda as MRT 2 (PDP
and underground contract), PTMP and a better valuation for the divestment of
Splash are key rerating factors. Muhibbah has been oversold, despite an
unchanged order book outlook. Chances of securing packages from Rapid in the
medium term look good to us. Maintain Overweight. We upgrade Benalec from
Reduce to Add we expect a re-rating of the stock to be mainly event-driven,
underpinned by a recovery story.

Huge potential for Benalec
Our earlier estimates show that potential earnings enhancement could be
sizeable. Working on a RM52 psf average reclamation cost (relatively higher
than the benchmark reclamation cost for the group's project in Malacca) and a
fair RM65 psf selling price (RM13 psf surplus value), Benalec could gain
RM566m in net profit over 5 years assuming that works begin in FY15 or over
RM100m p.a. This is equivalent to double the group's FY15 forecasted net profit.
Our current RNAV estimate and EPS forecasts only factors in outstanding
reclamation works in Malacca and potential new reclamation works
representing 20% of Tanjung Piai's 1,000-acre. Even if Benalec initiates land
reclamation work on a smaller scale, the pending EIA approval is longer-term
positive given Benalec's position as a key player in South Johor.

Benalec could re-emerge as the best proxy
According to the initial plans, Tanjung Piai is to be development into an oil
storage facility. Two years ago, Benalec signed a development agreement (DA)
with the state of Johor. This agreement gives the group the right to reclaim land
at two sites in south Johor, namely Tanjung Piai for 20 years and Pengerang for
10 years. Benalec submitted its full EIA proposal in late Oct 14. Given the
3-month timeline for approval, there is a possibility of positive newsflow in the
short term. If EIA is secured, the next step would be securing the sale and
purchase agreement (SPA) with an off taker.

REVIVAL OF LAND RECLAMATION JOBS IN SOUTH JOHOR?
EIA approval could be a game changer
The recent environmental impact assessment (EIA) approval granted for land
reclamation works relating to the 1,368ha Forest City development by Country
Garden Pacific View could be a precursor to EIA approvals for other similar land
reclamation contracts. We believe for 2015, this could shape up to be a recovery
story for Benalec, in view of the group's full submission of its EIA proposal for a
1,000-acre land reclamation works off the coast of Tanjung Piai in South Johor
three months ago.

in 2015, backed by healthy outstanding order books that should sustain a 1-2
year construction run-rate. Bigger contractors are still targeting RM1bn-2bn of
new jobs in 2015, while smaller players are looking at RM200m-500m. This
should support an average 31% growth in order books by end 2015.

SECTOR FUNDAMENTALS ARE HEALTHY
Flipside of falling crude oil prices and order book growth
We believe contractors are net beneficiaries of falling crude oil prices in light of
the cost advantage. Contractors with secured projects YTD have the cost
advantage (margin preservation potential and the ability to better offset the
impact of GST and higher electricity tariff) in view of the depressed domestic
selling prices for cement (due to price volatility from the competitive
landscape/oversupply situation) and steel (dumping from China, which hurts
domestic pricing power). As of the last reporting season, construction margin
trends for contractors range between 6% and 8% and should be relatively stable

Perceived risks of various projects do not look too bad
Our analysis on the risks of cancellation, deferment or delays of projects shows
that it is not all that worrying for the major projects. We conclude that 75% of
the total 16 major jobs carry low risk of cancellation, deferment or delays while
the balance 25% has medium to high risk as the projects has made the least
progress since 2014. These are the Pan-Borneo Highway (which may roll out
less than 5% of the total project value of RM27bn), KL-Singapore HSR,
Gemas-JB rail double tracking and monorail extension. Low risk projects
include the Petronas-funded Rapid project, which has so far seen over RM2bn
in total infra awards as at end 2014. We view Rapid as low risk as the
allocation/capex has achieved FID, and according to Petronas, it should be
relatively intact. This should be positive for the prospects of awards for the
subcontract works for the refinery packages (roughly estimated to be worth
RM30bn in total), which have yet begin the award of the smaller initial
packages.
Good news: MRT and LRT contracts are still on the cards
We remain encouraged by the recent clarification from the Land Public
Transport Commission (SPAD) that the RM23bn-25bn MRT2 and the RM9bn
LRT3 will proceed as scheduled, despite concerns over government spending
cuts due to falling oil prices. Recall that in 2014, Prime Minister Datuk Seri
Najib Razak announced a total allocation of slightly over RM30bn for the
development of these two jobs. SPAD chairman Tan Sri Syed Hamid Albar also
clarified that the MRT2 and LRT3 projects will not be affected by a possible
cutback in public spending on new projects. This is positive overall, and should
allay investors' concerns. The main question would be whether the 1Q15 initial
target for the tender phase for LRT 3 is still within reach, considering the final
alignment has not been firmed up.

Almost RM150bn worth of jobs in the pipeline
Our compilation of major jobs that have a strong likelihood of being
implemented within the next 1-2 years remains relatively unchanged. However,
what is more encouraging is that the projects have made somewhat considerable
progress in 2H14. Most of the projects are in the tender and award stage, and
should be able to translate to active order book growth phase for contractors,
especially in 2H15. We calculate a total of c.RM150bn worth of projects, which is
arguably the sector's highest value of outstanding projects at any one time in the
last decade. Moreover, for the first time since the launch of MRT 1 in 2012, two
projects will follow the project delivery partner (PDP) model. These are the
RM27bn Penang Transport Masterplan (PTMP) and the RM9bn LRT 3. This is
good news as higher value projects move up the value chain and benefit bigger
contractors with good track records in project managing government-initiated
infrastructure contracts.

c.60% of major jobs are not directly government-funded
We extend our compilation and analysis of major outstanding projects to show
that sector catalysts are likely to return. The good news is that almost 60% of
the total identifiable major projects in the pipeline fall under the private sector
category, while the balance falls under the government's direct spending, or
projects initiated by the government. Our compilation excludes the potential
private sector spending on power plant projects, given the still vague timeline
for tenders and awards of the civil works worth RM1bn-4bn in total.

OUTLOOK
Government has set the record straight for infra spending
We work on the base-case scenario that the government will continue to be
more focused and zero-in on projects which 1) possess relatively higher
economic IRR, 2) jobs which serve national interests and 3) fall under public
transport infra upgrades. At this juncture, and especially following the
clarification from the government that the RM49bn development expenditure
(DE) in Budget 2015 is intact, we do not think that investors should take a
worst-case scenario view, i.e. major delays and cancellation of outstanding
projects. We concur with the general view among contractors that there could be
a slight revision in terms of timeline for the progress of jobs, but it should be
well within 2015. Key positives from the Prime Minister's recent speech were:
1) the government will maintain and spend the development expenditure budget
of RM49bn for 2015,
2) the amount will be used for public housing, flood mitigation, water supply
and electricity projects,
3) the amount will also be used for public transport infrastructure projects such
as the Pan-Borneo Highway and
4) the projects in Rapid and Pengerang will be implemented.
What are the key projects under Budget 2015?
To recap, key projects identified for Budget 2015 focus more on the
implementation of nine public transport and highway infrastructure projects
with a total value of RM76bn. Of the total number of jobs, six are
highways/roads while three are rail (LRT and MRT). The highway projects are 1)
Sg. Besi-Ulu Kelang Expressway (SUKE), 2) West Coast Expressway (WCE), 3)
Damansara-Shah Highway (DASH), 4) East Klang Valley Expressway (EKVE)
and 5) Pan-Borneo Highway. Projects for the rail segment are 6) East Coast
rail upgrade, 7) LRT 3 to Klang, and 8) MRT 2. In addition, RM943m has been
allocated for the construction and upgrade of rural roads in Sabah and Sarawak.

Negative sentiment overplayed
2015 IN REVIEW
KL CON index outperformed the KLCI
The KL CON index outperformed the KLCI in 2014, but with a marginal growth
of 0.4% vs. KLCI's decline of 5.7%. The KL CON index was considerably slower
compared to the 17% growth achieved in 2013. Most of the factors causing the
decline in share prices flowed through in the later part of 2H14, stoked by the
collapse in global oil prices, which in turn, raised implementation risks for
domestic projects that directly needed government funding. This had somewhat
offset the positives from the active period of job rollouts from mid-2014 and the
early Oct-14 announcement of Budget 2015's RM49bn development
expenditure.
Construction stocks fell 8% on average
The larger cap contractors under our coverage performed relatively better
compared to the smaller caps. This was not too surprising for Gamuda, (+6%) as
MRT 2 newsflow was quite active along with more clarity about potential new
ventures from the RM27bn Penang transport masterplan (PTMP). IJM Corp’s
share price was up 12%, thanks to the official award of the WCE while Sunway’s
share price was up 22% mainly due to the potential special dividends arising
from the upcoming listing of Sunway Construction this year. The top losers
(down 22-50%) were Benalec, Mudajaya and WCT due to delays in project
awards and weakening earnings prospects. Muhibbah Engineering's share price
tumbled 18%, as sentiment eroded (together with the likes of other pure oil &
gas players) in view of the group's exposure to oil and gas infra and Petronas's
plans to cut capex. YTL Corp fell 2% due to the lack of clarity on the
KL-Singapore HSR but it was supported by its high dividend yield.

Consider the liquid big cap and be selective
on oversold stocks
We are positive on the outlook for both big caps Gamuda
and IJM Corp, but we continue to prefer Gamuda (our top
big cap pick) as 2015 sector developments would translate
to clearer order book growth potential and new ventures.
Fundamentals of Muhibbah Engineering have not
changed, following the collapse of the oil price. The stock
has displayed attractive value, supported by Rapid and
Pengerang, which have secured Petronas' FID. Benalec,
one of our worst performers, could emerge as a recovery
play in 2015.

Order book growth intact; to sustain a 1-2
years of construction run-rate
Contractors' margin ranges between 6% and 8% and
should be relatively stable over the course of 2015, backed
by a healthy outstanding order book that should sustain a
1-2 year construction run-rate. Bigger contractors are still
targeting RM1bn-2bn of new jobs in 2015, while smaller
players are looking at RM200m-500m. This should
support an average 31% growth in order books by
end-2015.

Sentiment on the sector is likely to
gradually recover. We like Gamuda
(our top big-cap pick) for its
exposure to MRT and Penang
transport infra. Muhibbah, our
small/mid-cap pick, remains
oversold but offers unchanged order
book growth potential. We upgrade
Benalec from reduce to Add.
Maintain Overweight.
Optimistic on the flipside
The KL CON index outperformed the
KLCI in 2014, but with a marginal
growth of 0.4% vs. KLCI's decline of
5.7%. Construction stocks under our
coverage declined 8% on average.
The larger cap contractors performed
relatively better compared to the
smaller caps. Looking into 2015, the
bulk of the infra projects in the
pipeline are largely private-sector
driven and should not be directly
impacted by the reduced oil price.
Major government-initiated projects
of national interest should continue
to stay on the cards. On the flipside,
due to the cheaper raw material cost
environment (fuel, cement and steel),
this would be a good time for the
government and private sectors to
implement projects. We remain
optimistic about Petronas's-funded
projects that have received the final
investment decision (FID), mainly
the ones in Rapid and Pengerang.
RM150bn worth of jobs
The total c.RM150bn worth of
projects is arguably the sector's
highest value of outstanding projects
at any one time in the last decade.
Based on our analysis, 75% of the
total 16 major jobs carry a low risk of
cancellation, deferment or delays
while the balance 25% shows
medium to high risk mainly due to 1)
financial closure, 2) funding
structure, 3) project structure and 4)
bilateral agreements for cross-border
contracts.
Be selective
We continue to like Gamuda as MRT
2 (PDP and underground contract),
PTMP and a better valuation for the
divestment of Splash are key rerating
factors. Muhibbah has been oversold
with an unchanged order book
outlook. In our view, chances of
securing packages from Rapid in the
medium term look good. In our small
cap space, we upgrade Benalec from
Reduce to Add. Likely steady
rerating is underpinned by positive
expectations in securing the EIA
approval for Tanjung Piai in South

Negative sentiment overplayed
Taking our cue from the unchanged RM49bn development expenditure
and the government's focus on public transport infra, we believe a
negative scenario of deferment of projects in light of the falling oil price
should not be overplayed. This is also backed by private sector jobs.

Benalec is going to be a strong recovery

Sunway
The group plans to complete the listing of Sunway Construction this year, with
potential special dividends of most likely 20-30sen/share for Sunway Bhd
shareholders remaining intact. Construction order book growth is anchored by
domestic building jobs. The group does not focus on BOT-type projects like
highways, but will be vying for a package from MRT 2 once tenders are open.
WCT
WCT's construction target this year remains domestic based, with potential
upside from an infrastructure project in Qatar. The group continues to be less
aggressive in tenders vs. other contractors in view of support from its internal
works. The group is aiming for RM1bn worth of domestic jobs and RM1bn worth
of overseas projects in 2015. WCT will ramp up its plans for a REIT exercise for
four its property investment assets. The REIT deal should have a clearer
direction by end 2015. Management remains cautious about the property sales
outlook in 2015.
Benalec
Land reclamation works and land sales continue to be focused on Malacca. The
group targets to secure the environmental impact assessment (EIA) approval
within 1H15 at least for the 1,000-acre land reclamation contract in Tanjung
Piai. The signing of the sale and purchase (SPA) agreement with a potential off
taker has been delayed by another six months from Dec-14. If the EIA is secured,
the group's strategy in 2015 would be to commence land reclamation works on
smaller parcels off Tanjung Piai. The next challenge would be to secure its
maiden sale and purchase agreement (SPA) with an off taker.
Mudajaya
The group's strategy in 2015 remains focused on converting its c.RM5bn tender
book into awards, which has been delayed since last year. This has caused its
order book to fall below RM1bn and construction margins to decline to single
digits. Commercial operations of the 1,440MW coal-fired power plant is on
track to start in 1H15.
YTL Corp
Taking advantage of the 3-4% domestic cement demand growth in 2015 is the
key strategy for YTL Cement, being the group's main profit generator. This is in
spite of the pricing volatility and competitive market. YTL Power's key strategy
looks likely to include exploring new assets in view of the expiry of its existing
IPPs. YTL Corp’s construction order book growth strategy is underpinned by the
extension of the ERL to Malacca and the KL-Singapore HSR.

COMPANIES' STRATEGIES FOR 2015
Contractors are being selective in tenders
Contractors under coverage are positive about order book growth driven by the
domestic market. Companies like Gamuda, IJM Corp, Sunway, WCT, Mudajaya,
Muhibbah Engineering, and MRCB are keen to tender for the MRT 2 project,
which should begin prequalification rounds in 2H15. Most contractors are aware
of the PDP structure of LRT 3 but only a few sounded keen to pursue it. In terms
of new highway jobs, Muhibbah Engineering and Mudajaya continues to more
positive about its chances. The only contractor that is remains bullish on the oil
& gas/port infra segment is Muhibbah Engineering while WCT is the only player
that is still targeting a sizeable infra project from Qatar. YTL Corp's strategy for
the construction side is underpinned by the likely implementation of the
KL-Singapore HSR. Benalec's strategy in 2015 shifts to land reclamation works
in Johor, pending the approval of the long-awaited environmental impact
assessment (EIA) for an oil storage facility off the coast of Tanjung Piai in South
Johor.
Gamuda
The group's focus for 2015 will be 1) executing the ongoing MRT 1 which is
aiming for full completion and operations by mid-2017; both under its above
ground PDP scope and underground construction works, 2) refocusing on
property development within Klang Valley, given its longer-term potential
especially for the newly acquired land banks in Rawang, and more land banking,
and 3) targeting for a substantial role in the RM27bn Penang Transport
Masterplan (PTMP), which should be announcing the PDP winner in Aug-15.
Order book growth should resume in 2016, as 2015 will mainly be a pre-award
phase for MRT 2. The group will also work on finalising the divestment of its
40%-owned Splash. Chances of a better pricing for Splash look more promising
under Selangor's new leadership.
IJM Corp
IJM Corp's construction order book has more than doubled to over RM6bn with
the award of a direct portion of the West Coast Expressway (WCE). Its order
book now stands as the highest in the sector, suggesting that execution will be
the order of the day for 2015. Strategies for property development have changed
to focusing on ramping up launches pre-GST in April, especially for its ventures
in Selangor, Seremban and Penang. The privatisation of IJM Land should be
completed before mid-2015. Strategies for order book growth are underpinned
by the Kuantan Port expansion and other selected building jobs. The group is
not aggressively vying for government-funded projects.
Muhibbah Engineering
Growth strategies for 2015 continue to revolve around the group's niche areas,
i.e. oil & gas/marine and port infrastructure, and domestic civil works. The
group is not too concerned about the potential capex cuts by Petronas as Rapid
and Pengerang have achieved the FID. A possible risk this year is the timing of
the awards. Domestic highway construction and port-related works are also on
the group's radar.
MRCB
A recovery in domestic tender participation in 2015 vs. 2014 drives the group's
strategies for its construction arm. It will be focused on environmental
infrastructure and a potentially new BOT-type project i.e. the waste-to-energy
plant worth c.RM800m as reported by the press in 2014. Its order book growth
target is also supported by internal works. On property development, the
64-acre Project MX-1 in Kwasa Damansara is aiming to begin works in mid
2016. The group may consider another REIT move to help fund its equity
portion for Project MX-1, or alternatively pursue other funding methods for its
over RM800m equity portion for its 70% stake in the JV co.

Mudajaya
The group's strategy in 2015 remains focused on converting its c.RM5bn tender
book into awards, which has been delayed since last year. This has caused its
order book to fall below RM1bn and construction margins to decline to single
digits. Commercial operations of the 1,440MW coal-fired power plant is on
track to start in 1H15.

OH OK I FOUND IT,,YESTERDAY UPSURGE WAS DUE TO CIMB REPORT ON CONSTRUCTION SECTOR,,,SOME OF IT IS MENTION HERE-----

fong7 did you check out the TA graph? :)
27/01/2015 15:01

yes what the chart is saying???????

but no news when i google it

i think some parties are buying,, but no news already check online..

http://klse.i3investor.com/blogs/kltrader/69257.jsp

what type of advantage does this have over the mother share??? many are saying mother share of myeg is overbought with very high PE

http://klse.i3investor.com/blogs/MplusOnline/69188.jsp

any news???????

WHY this counter going up today????????

Easy guys stay cool the global oil prices downtrend had created this blunder delays on dsonic reward for projects...stay cool wait till oil prices stablize first

LTE WIRELESS BUSINESS

Who is holding strong on LTE WIRELESS

Macquarie Research-----------PLEASE can anybody give me the website link?? thanks

Macquarie Research---- can i register on their research for a trial period???

good one thanks

it s going up after flushing out,,searching for new support levels...do not worry cimb target is 3.90,,,so much room to go up...daring ones will go in now.... fear ones will be left behind

Post removed.Why?

Why many are so jealous when umno made money???

Umno made money,,, pkr still flying kites

Myeg powerfull

PLEASE GIVE SOME LINKS WHERE WE CAN CHECK OIL PRICES???????