Last October, Prime Minister Datuk Seri Najib Razak announced the construction of the RM5.3 billion Sungai Besi-Ulu Klang Expressway, the RM5 billion West Coast Expressway, the RM4.2 billion Damansara-Shah Alam Highway and the RM1.6 billion Eastern Klang Valley Expressway.<\/p>\n
In addition to the highways, the RM23 billion Mass Rapid Transit 2 line from Selayang to Putrajaya, the RM69 billion Pengerang Integrated Petroleum Complex<\/a><\/span> and the LRT 3 projects are all in the pipeline for the new year.<\/p>\n As a result, Kenanga Research has an \u201coverweight\u201d rating on the sector. Specifically, Gamuda Bhd<\/a><\/span> ( The only challenge contractors may face, according to Iqbal, is in keeping cost structure efficient.<\/p>\n \u201cCost will be challenging for construction players because there will be intense competition for resources to complete jobs. So, they will have to balance their order books against their own budget and resources,\u201d he explained.<\/p>\n UOB KayHian Research<\/a><\/span> head of research Vincent Khoo is similarly optimistic about the sector and has an \u201coverweight\u201d rating on it, citing building material cost as a main reason and manpower shortage as the sector\u2019s main challenge.<\/p>\n \u201cWe are currently overweight on the sector as medium-term earnings visibility is good, underpinned by potential lower costs, amid lower oil prices of several building materials such as bitumen,\u201d Khoo said.<\/p>\n \u201cManpower will be a key challenge given there will be many construction projects undertaken concurrently. But there is also the potential of lower development expenditure by the government amid lower revenue derived from lower oil prices\u201d he added.<\/p>\n IJM Corp Bhd<\/a><\/span> ( It noted that IJM also stands to gain from the Kuantan Port extension project worth approximately RM1.5 billion.<\/p>\n On the ground, industry players echoed analysts\u2019 positive outlook for the sector but voiced concerns about completing the projects due to limited resources such as manpower and machinery.<\/p>\n \u201cI think 2015 is a year where contractors will enjoy themselves because there will be a lot of work going around, especially with government projects. But we hope that this kind of boom in the sector will be sustainable.<\/p>\n \u201cWe hope the government will implement its projects progressively, rather than all at one go, because there is a real shortage of manpower and machinery. Everyone is going for the same limited pool of resources,\u201d Master Builders Association Malaysia<\/a><\/span> president Matthew Tee told The Edge Financial Daily.<\/p>\n \u201cWe are [already] seeing a real shortage of manpower at construction sites. The industry is dependent on foreign labour and with the recent government policies and crackdowns on migrant workers, we may face greater difficulty in completing our jobs,\u201d he said.<\/p>\n Tee is also worried that competition among industry players for resources could drive up costs \u00a0and cause \u201cbare, single-digit\u201d profit margins to depreciate further.<\/p>\n \u201cContractors are service providers and should be fairly paid for their services. But, at this point, competition is so stiff that contractors are more concerned about securing jobs than profit margin,\u201d he said.<\/p>\n While the outlook for infrastructure-related construction is upbeat, property development-cum-construction firmKen Holdings Bhd<\/a><\/span> ( \u201cThere is always a close link between the property development market and the private sector construction. When there is a slowdown in property development, construction firms will also feel the impact,\u201d he said.<\/p>\n \u201cThere is no question that the property market has seen softer growth in transactions and developers have held back or postponed their property launches. When that happens, it is inevitable that the private construction sector will have fewer jobs,\u201d he said.<\/p>\n Despite that, Tan is hopeful that private sector contractors will benefit from the knock-on effect of the government\u2019s infrastructure development.<\/p>\n \u201cI don\u2019t think property developers will be very aggressive this year with their launches. However, we hope that the ongoing infrastructure development will open up new areas and create [more] opportunities for property development eventually,\u201d he said.<\/p>\n <\/p>\n This article first appeared in The Edge Financial Daily<\/em>, on January 5, 2015.<\/p>\n","protected":false},"excerpt":{"rendered":" KUALA LUMPUR: Thanks to the government\u2019s ambitious infrastructure goals, 2015 will likely be a busy year for contractors. \u201cJudging by Budget 2015, it is going to be a good year for the construction sector because the government is ramping up infrastructure development. So, the usual challenges like job prospects and filling up an empty order …<\/p>\n![\"\"](\"http:\/\/edgemarkets-fl.s3.amazonaws.com\/img\/stock.png\")
Financial Dashboard<\/a><\/span>) and Muhibbah Engineering (M) Bhd<\/a><\/span> ( Financial Dashboard<\/a><\/span>) are the research house\u2019s top picks as they are likely to be beneficiaries of government infrastructure projects.<\/p>\n Financial Dashboard<\/a><\/span>) is UOB KayHian Research\u2019s top pick as the research house sees the execution of the West Coast Expressway project is on the way and will anchor the company\u2019s middle-term earnings of RM2.8 billion, with a potential upside of an additional RM22 billion, via open tender.<\/p>\n Financial Dashboard<\/a><\/span>) chief executive Sam Tan said the outlook for private sector construction may be \u201cdampened\u201d by persisting cooling measures introduced by the government on the property sector.<\/p>\n