Overweight call on the CONSTRUCTION sector

AmResearch is maintaining its Overweight call on the CONSTRUCTION [] sector, where order book visibility should improve in the coming months as it expects up to RM62 billion worth of select cornerstone projects to be rolled-out over the next six to 12 months.

It said on Monday, Nov 16 its top picks for the construction sector are WCT, IJM and Gamuda. It also prefered steel to cement stocks for exposure to the building materials theme - another key beneficiary of a re-acceleration of infrastructure spending. It continued to like steel maker ANN JOO RESOURCES BHD [].

The pre-qualification tenders for the proposed Klang Valley Light Rail Transit (LRT) extension works were unveiled on Nov 3. Tenders are for facilities packages, which are is the main civil and infrastructure works, and other sub-packages.

Submission for prequalification bids will be opened until Dec 16 although tenders for the systems and rolling stock portion - which includes mechanical & electrical (M&E) - have yet to be called for.

The Edge Weekly reported the scope of works for the facilities package include guideway structures, actual stations and the park & ride buildings. Tt added that the main civil works programme could be broken down into six main packages. This includes the actual bricks-and-mortar structure for the tracks as well as LRT stations.

AmResearch said earlier reports stated the Klang Valley LRT extension works were expected to cost an initial RM7 billion. The project entailled construction of additional tracks linking both the Kelana Jaya (17km) as well as Ampang (17.7km)lines to Putra Heights along the southern tip of Klang Valley.

"Based on our channel checks, most big construction outfits in Malaysia have submitted bids for the civil works part of this massive project. But we our unclear as to how the work packages would be carved out - e.g. vertically or geographically spread," it said.

AmResearch said going by operating track record, it believed both IJM Corp Bhd (IJM) and GAMUDA BHD [] (Gamuda) are frontrunners for the LRT jobs. However, it did not discount possibility of a consortium being formed to facilitate entry of other local players at subcontractor level, which may include WCT BHD [] (WCT) and Loh & Loh Bhd.

As for the M&E portion, it said that the scope for local participation appears limited due to the high-level of technical expertise required to build and commission LRT systems.