• Maintain OVERWEIGHT. We recently visited the city of Elmina (Elmina), including Elmina Business Park (EBP), courtesy of Sime Darby Property (SDPR MK, BUY, TP: MYR2.20). With >MYR10bn worth of remaining GDV at Elmina, we envisage ample potential opportunities for contractors to participate – be it residential, commercial, or industrial jobs. Contractors with exposure in Elmina include Kitacon (KITACON MK, NR), TSR Capital (TSRC MK, NR), TCS Group Holdings (TCS MK, NR), and Gamuda (GAM).

• Kitacon is a contractor with a solid track record in Elmina, with at least MYR300m worth of jobs awarded to the group under this township. These include the Elmina Lakeside Mall (commenced operations in August; value: MYR100.5m) and twin factories at EBP (MYR44.5m). Other contractors such as TCS have had jobs at Elmina, albeit on a smaller scale. The remaining landbank of >1,000 acres at Elmina West and Kota Elmina should continue providing bright job prospects for contractors focused on township development, in our view.

• Eastern & Oriental’s (EAST MK, BUY, MYR1.38) land at Elmina West (66 acres) could likely see the first launch of 360 stratified landed terrace houses in FY25, followed by >110 shophouses in FY26. Recall: Kerjaya Prospek (KPG) secured a MYR25m job in 3Q23 to undertake earthworks for said development at Elmina West. Henceforth, we envisage KPG clinching further jobs there, as the contractor has been actively involved in EAST’s Andaman Island development in Penang via contracts worth >MYR1bn.

• EBP overview. EBP 1 (536 acres) was launched in 2019 with lots for industrial buildings and ready-built factories already fully sold. EBP 2 (906 acres) under the Signature Collection (26.2 acres) twin factories offering has seen a 100% take-up rate upon its launch in September. This reflects growing demand for well-planned industrial spaces in the Klang Valley. Back in Jul 2023, IJM Corp entered a JV with FMM Elmina to construct and develop two logistics hubs at Elmina with floor spaces and capacities totalling 500k sq ft and 110k pallets on 22 acres of freehold land. Hence, we think future launches at EBP 2 may attract contractors with industrial building capabilities.

• Data centres (DCs) at EBP. Pearl Computing Malaysia’s DC at EBP (estimated capacity of 80MW) (Figure 3) – being constructed by GAM for MYR1.7bn (awarded in May) – has reached a 2-4% completion rate in our view and is set for completion in 3Q26. While we do not view other upcoming DCs in EBP that soon, the ongoing construction of said DC by GAM may likely continue benefitting mechanical, electrical, and plumbing (MEP) contractors. The MEP fit-out works portion of the DC is valued at MYR929m and, as of late, AWC (AWC MK, NR)and LFE Corp (LFE MK, NR) have been awarded subcontracts (Figure 8) related to MEP works for the DC being built by GAM.

• Key downside risk: Longer-than-expected rollouts of projects at Elmina.

Source: RHB Securities Research - 28 Oct 2024