Image credit: Cahya Mata Sarawak
KUCHING: Researchers with MIDF Amanah Investment Bank Bhd (MIDF Research) believe Sarawak’s construction prospects remain favourable.
“Given that the next Sarawak state election will be held on or before Sept 7, 2021, we opine there will be more Sarawak job flows in 2020 to stimulate economic growth,” it said in its third quarter (3Q) report review yesterday.
“Going ahead, we anticipate the Second Trunk Road project and Sabah-Sarawak Link Road infrastructure projects to be tendering out its remaining subcontracts in the second half of the year.
“Additionally, it is worthwhile to note that on May 17, 2020, the allocation for the Sarawak water grid programme was upgraded to RM4 billion from RM2.8 billion previously.
“We believe that one of our coverage, KKB Engineering Bhd (KKB) is likely to be the beneficiary of state water projects, considering its long track record in the piping and steel business.
“For instance, the group managed to booked revenue increased to RM21.6 million by about 340.8 per cent year on year (y-o-y) in the 1QFY20 due to increase off takes of steel pipes required under the Sarawak Water Supply Grid Programme before the movement control order (MCO) imposition in March 2020.
“In regards to the above, our players in East Malaysia like Cahya Mata Sarawak Bhd, KKB and Hock Seng Lee Bhd are expected to benefit from bullish prospects of the construction sector in Sarawak.”
This observation comes as frozen construction activities amidst the MCO period led to slower construction progress.
Based on data from Department of Statistics Malaysia, Malaysia’s construction sector contracted by 6.3 per cent in 1QCY20, amounting to RM35 billion, compared with the same month of the previous year.
To combat the Covid-19 impact and stabilise the economy, the Government introduced RM250 billion Prihatin Stimulus Package (Prihatin) and RM25 billion Penjana Short Tem Recovery Plan (Penjana). Under the stimulus package, only RM2 billion was allocated for domestic, small-scale infrastructure projects.
This includes implementing infrastructure projects in Federal Land Development Authority and others (RM600 million), epairing dilapidated school in Sabah and Sarawak (RM350 million) and refurbishing housing for the poor (RM150 million).
“It is also worth noting that the government also announced the continuation of all projects allocated in the 2020 Budget – including the ECRL, MRT 2 and National Optical and Connectivity Plan,” MIDF Research continued. “We opine that the continuation of these mega infrastructure projects is seen as a strong catalyst for local construction sector.
“These projects are expected to assist economic growth as it will stimulate other new investments. As for the Penjana Recovery Plan, the Government has introduced SME Bank via the SME Go-Scheme which will provide financing to 16,000 qualified G2 and G3 contractors who have received projects under the Prihatin package.
“Plus, no collateral or deposit is required. We believe that this measures are positive for small and medium local construction players as we think this implementation will encourage more job replenishments.
“Altogether, we can conclude that both Prihatin and Penjana packages will be benefiting mostly small and medium contractors rather than big players in the sector while the big players in the sector can heave a sigh of relief with the continuation of mega projects allocated in the 2020 Budget.
Source: https://www.theborneopost.com/2020/07/15/sarawaks-construction-prospects-remain-resilient/