Construction Weekly Review: 12th – 18th January 2009

January 19, 2009 at 9:15 am Leave a comment

• Construction sector ended mixed
The construction sector ended mixed last week as IJM Corporation and Sunway Holdings posted weekly gains but Gamuda and Muhibbah Engineering edged lower. On notable filings, Employees Provident Fund (EPF) and Platinum Investment Management disposed of 0.12m and 0.10m shares respectively in Gamuda. However, EPF was more bullish on IJM Corporation and Muhibbah Engineering as it added 1.44m and 0.73m shares respectively in these companies. Lembaga Tabung Haji is the other major shareholder which increased its holdings in Muhibbah
Engineering with another 0.16m shares.
• In the news
The Shimizu Corp-led consortium is prepared to drop a conditional variation order (VO) clause in their tender proposal for the tunnelling portion of the RM5bn Pahang-Selangor Water Transfer project. It is learnt the consortium is waiting for the Malaysian government to call in the shortlisted companies to clarify their respective tender proposals.
WCT Bhd, which recently suffered a major setback when its on-going Meydan Racecourse contract in Dubai was cancelled, has seen one of its major shareholders Temasek Holdings (Private) Ltd trim its position below the 5% reporting threshold. Meanwhile, Meydan LLC has made a statement that the racecourse will be completed in time despite the contract cancellation. Last week, the fast contracting property and construction sectors in Dubai reported another contract delay. Nakheel Harbour & Tower, which will be the world tallest building upon completion, has stopped work and the state-owned developer will only resume work in 12 months.
• No contracts awarded
No new jobs were reported being awarded last week.
• Maintain UNDERWEIGHT
While we maintain underweight on the construction sector, we still have buy calls on construction stocks under coverage as share prices have corrected significantly and very much at distressed level. We are cautiously calling an underweight now in view of negative outlook in the near term due to order book replenishment risk.

Share price performance

The construction sector ended mixed last week as IJM Corporation and Sunway Holdings posted weekly gains but Gamuda and Muhibbah Engineering edged lower. On notable filings, Employees Provident Fund (EPF) and Platinum Investment Management disposed of 0.12m and 0.10m shares respectively in Gamuda. However, EPF was more bullish on IJM Corporation and Muhibbah Engineering as it added 1.44m and 0.73m shares respectively in these companies. Lembaga Tabung Haji is the other major shareholder which increased its holdings in Muhibbah Engineering with another 0.16m shares.

Notable construction news
– The Shimizu Corp-led consortium is prepared to drop a conditional variation order (VO) clause in their tender proposal for the tunnelling portion of the RM5bn Pahang-Selangor Water Transfer project, for which it has submitted the lowest bid. Shimizu’s partners in the consortium are UEM Builder Bhd, IJM Corp Bhd and Nishimatsu Construction Co. It is learnt the consortium is waiting for the Malaysian government to call in the shortlisted companies to clarify their respective tender proposals.
– Temasek Holdings (Private) Ltd has ceased to be a substantial shareholder of WCT Bhd after the Singapore government’s investment arm disposed of 253,400 shares in the latter, thereby reducing its stake to below the 5% threshold. According to a filing to Bursa Malaysia Securities, Temasek’s stake in WCT was reduced to 4.99% comprising 38.52m shares after the disposal on Jan 9.
– The recent contract cancellation of the WCT Bhd-Arabtec Construction LLC joint venture by Meydan LLC took another twist when the latter announced it could complete the project on time. A Bernama report said the government-owned Meydan was confident that its new racecourse would be ready for the Dubai World Cup horse race in 2010 despite the cancellation of its contract with the two companies involved in the project. According to a Meydan statement, the contract was cancelled for the joint venture’s failure to adhere to the agreed construction time schedule.
– The Dubai developer that is building the world’s tallest tower, Nakheel Harbour & Tower, has delayed the project after the global financial crisis halted a property boom in the Gulf. Nakheel PJSC, a state-owned company, will resume work on the building in 12 months, according to an e-mailed statement yesterday. The tower, comprising office space and homes, will have a height of one kilometre.
– Senegal plans to spend US$820m on a new airport and highway and it wants Malaysian companies to bid for these projects. Its ambassador to Malaysia Abdel Kader Pierre Fall said the authorities are finalising the packages for the proposed projects. Senegal needs to build a new airport because the existing Leopold Sedar Senghor International Airport in Dakar is congested due to rising passenger and freight traffic.
– Giant Group Ltd (GGL), a Malaysian-owned company, is close to finalising a US$5bn (RM17.75bn) contract to construct a 210km electrified railway line in Laos that will connect it to Thailand in the west and Vietnam in the east. GGL, which is based in Malaysia and incorporated in the British Virgin Islands, signed a memorandum of understanding (MoU) with the Laotian government last November towards concluding the terms of the contract. Under the MoU, GGL is to completely finance and develop the project in exchange for a 25-year concession to operate the line, with the possibility of it being extended a further 12 years. The project will also involve the construction of stations and an immigration control office. Construction is expected to take 5 to 8 years.

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