Construction Weekly Review: 15th – 21st December 2008

December 23, 2008 at 2:15 am Leave a comment

· Construction stocks broadly higher
KLSE Construction Index rose by 2.7% last week and the main gainers were Muhibbah Engineering and IJM Corporation which rose 8.9% and 7.5% respectively. Employees Provident Fund added 3.87m and 0.05m shares in Gamuda and Muhibbah Engineering respectively.
· Spillover effect from Singapore’s pump-priming
Singapore’s plans to bring forward up to S$4.7bn (RM11.3bn) worth of construction projects to help its faltering economy may have a spillover effect on Malaysian construction players as well as building material suppliers. Among companies under coverage, Sunway Holdings may stand to benefit as it already has a presence in the island republic via its joint ventures to develop apartments as well as supply of premix concrete and aggregates.
· Contracts awarded
There was only one notable overseas job awarded during the week amounting to RM32.3m.
· Disappointing 1QFY09 results by Gamuda
Gamuda’s 1QFY09 net profit of RM55.0m was 37.5% lower y-o-y due to margin compression and slow work progress in the double tracking project as a result of hiccups in land acquisition. The 5-year project will now be delayed by a year. An interim dividend of 4 sen gross has been declared, a sharp cut from 12.5 sen in 1QFY08. For further details, please refer to our report on Gamuda’s 1QFY09 results dated 18 December.
· Maintain UNDERWEIGHT

Share price performance

KLSE Construction Index rose by 2.7% last week and the main gainers were Muhibbah Engineering and IJM Corporation which rose 8.9% and 7.5% respectively. Employees Provident Fund added 3.87m and 0.05m shares in Gamuda and Muhibbah Engineering respectively.

Spillover effect from Singapore’s pump-priming

Singapore’s plans to bring forward up to S$4.7bn (RM11.3bn) worth of construction projects to help its faltering economy may have a spillover effect on Malaysian construction players as well as building material suppliers. Among companies under coverage, Sunway Holdings may stand to benefit as it already has a presence in the island republic via its joint ventures to develop apartments as well as supply of premix concrete and aggregates.

Contracts awarded

There was only one notable overseas job awarded during the week amounting to RM32.3m.

Comments:

Gamuda’s 1QFY09 net profit was significantly lower due to margin compression and slow work progress in the double tracking project as a result of hiccups in land acquisition. The 5- year project will now be delayed by a year. An interim dividend of 4 sen gross has been declared, a sharp cut from 12.5 sen in 1QFY08.

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