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Construction weekly (Aug 16-22) - construction index up
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By ECM Libra Investment Research
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Monday, 23 August 2010 15:56 |
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• Ended last week on higher note
After a few weeks of sideways trading, the FBMKLCI inched higher by 2.6% to 1,395 while the KL Construction Index also charted a 1.1% increase to 248.9. Construction stocks under coverage i.e. IJM, Gamuda and Sunway Holdings all managed marginal gains, despite institutional funds selling a net 0.6% in Gamuda. In IJM, EPF took up 2.8m shares amounting to 0.2% while Skim Amanah Saham Bumiputra upped their stake by 1.3m shares or 0.1%.
• Notable construction news
Kumpulan Jetson has terminated its joint venture agreement with China State Construction Engineering (HK) Ltd which was entered into to jointly submit a tender for Naza group’s Platinum Park project. Jetson attributed the termination of the agreement to the inability of the parties and Naza to reach a consensus in relation to the payment arrangement in respect of the first progress payment. According to media report, the termination of the joint venture fuels earlier rumours that a tussle is brewing at Jetson’sboard, particularly between the Naza brothers – chairman Nasarudin and vice chairman Mohamad Faliq - and Datuk Teh Kian Ann, Jetson’s managing director.
Bina Puri Holdings has signed an agreement with the Brunei Economic Development Board to invest RM21.5m to turn three apartment blocks and its common areas into fully furnished serviced apartments. When the project is completed, Bina Puri will operate the serviced apartments for 20 years.
The Master Builders Association of Malaysia (MBAM) has called on the government for the speedy award of the remaining stimulus package projects and implementation 10th Malaysia Plan (10MP) projects to ensure the continuous and sustainable growth of the construction industry. MBAM was concerned as the total value of construction projects awarded had been declining in the last four quarters. As the 10MP will only be launched in October 2010, MBAM expects the new projects to only start contributing to the economy a year later.
• Contracts awarded
Hock Seng Lee was awarded a road project in Sarawak for a sum of RM47.1m with a duration of 24 months, while VTI Vintage was awarded a subcontract job for RM20.5m to carry out superstructural works to be completed within 26 weeks. This brings total contracts awarded this week to RM67.6m.
• Maintain Neutral
Valuation of construction stocks are no longer compelling as the expected award of mega projects in the coming months have largely been factored into existing earnings model. We remain Neutral on the sector with new job flows remaining patchy while the proposed mega projects are still under evaluation. Our top pick is Sunway Holdings which is trading at undemanding forward PE of 8.3 times.
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