Construction, Property And Utilities Stocks To Benefit From 10MP Announcement

KUALA LUMPUR, June 11 (Bernama) -- The equity market is expected to react positively to the unveiling of the 10th Malaysia Plan (10MP) (2011-2015).Construction, property and utilities-related stocks are expected to reap the immediate benefits from the announcement of 52 high impact projects worth RM63 billion under the 10MP yesterday, says research houses. The projects include seven toll highways, two coal power plants and the development of 1335 hectares (3,300 acres) of land in Sungai Buloh.

Also announced was the development of the Sungai Besi airport land in Kuala Lumpur and the KL International Financial District as well as the LNG regasification plant in Melaka.

OSK Research said construction and property would naturally feel the greatest impact from these projects, with the potential beneficiaries being Sarawakian construction players.

Agreeing with this, MIDF Research said it had identified Naim Holdings and Hock Seng Lee as shorter term benefeciaries of the budget.

Malaysian Resources Corporation Bhd (MRCB) is also expected to participate in the various rail projects.

"As for property, while noting that land value could be unlocked with the development of Sungai Buloh, Sungai Besi airport and Kampung Baru, we are concerned that existing commercial property values could be capped if the launch of these new developments is not properly planned," OSK said.

The utilities sector will benefit from plans for a LNG plant and new coal power plants coupled while planned subsidy reductions should help assuage concerns of a looming power crunch.

Another research house, Kenanga Research meanwhile, said contractors with a strong balance sheet would be able to bid more competitively with deferred payment contracts, lower construction cost through buying materials using cash and lower interest rates.

The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) yesterday, stayed in positive territory throughout the day and finished 1.23 points higher at 1,291.31.

The market though, did not react much to the unveiling of the five-year plan as it fell within market expectation.

"The unveiling of the 10MP did not come with surprises as rumours have preceded the event while plans as well as the broad themes were unveiled earlier.

"Rather, more details were unveiled, such as the estimated cost of a number of public-private partnerships (PPP) projects and confirmation of certain land development rumours," OSK said.

-- BERNAMA

Construction Sector: Overweight

AMRESEARCH maintains an "overweight" stance on the construction sector after IJM Corp Bhd bagged two contracts worth a combined RM247 million in Sarawak this week.

The stockbroker likes IJM, Gamuda, WCT, Naim Holdings Bhd and Hock Seng Lee in the sector.

"We expect a re-acceleration of contract awards ahead of the unveiling of the 10th Malaysia Plan in June," AmResearch said in a report yesterday.

"This will be further lifted by a recovery in construction margins and gradual revitalisation of order flows abroad - notably in India, the Middle East and Vietnam."

"We understand that the Murum Dam access road project consists of five main packages worth between RM700 million and RM800 million. Access roads are crucial to improve connectivity to the RM3 billion Murum Hydroelectric Dam - constructed by China's Three Gorges Project Corp Ltd."

"Award of first two packages to IJM will likely prod rollout of the project's three remaining packages worth an estimated RM500 million-RM600mil soon. Our channel checks indicate that Hock Seng Lee appears to be a frontrunner for at least two of three packages - given their solid track record as an infrastructure/land reclamation specialist in Sarawak."

"Latest development validates our growing conviction of intensifying contract flows from Sarawak, ahead of its state elections. Award of the work packages for the Murum Dam access roads to IJM follows a Business Times report earlier this week that up to eight contractors had been shortlisted for upgrading Sibu Airport."