East Coast Rail Line to benefit construction sector, say analysts

KUALA LUMPUR (Oct 24): Construction analysts see the proposed RM55 billion East Coast Rail Line project as the only excitement in Budget 2017. The 600km rail line will be implemented in phases and connect townships such as Port Klang, the Integrated Transport Terminal Gombak, Bentong, Mentakab, Kuantan, Kemaman, Kerteh, Kuala Terengganu, Kota Baru and Tumpat.

Malacca Securities Sdn Bhd analyst Kenneth Leong deemed the construction sector a “clear winner” in Budget 2017, compared with other sectors. Budget 2017 allocates a sum of RM46 billion for development expenditure, up 2.2% from RM45 billion in the recalibrated Budget 2016.

Leong opined that the announcement was a surprise for the construction sector, but noted it is unknown when the project contracts will be dished out. Therefore, he does not expect a rally in construction counters for now.

“Most construction counters such as George Kent (M) Bhd, Ekovest Bhd, Gamuda Bhd, WCT Holdings Bhd have already outperformed the general market in recent weeks. The stock market generally is still clouded by uncertainties from the US presidential election, interest rate hike, Italy’s constitutional referendum, China’s debt and Japan’s fiscal woes,” he told The Edge Financial Daily. Still, he said the government’s plan to tackle the water supply issue, including lack of supply capacity, drought, pollution from industrial waste and logging and pipe leakages may benefit water pipe manufacturers like Jaks Resources Bhd and EngTex Group Bhd.

TA Securities Holdings Bhd senior analyst Ooi Beng Hooi sees Gamuda Bhd, IJM Corp Bhd, WCT Holdings Bhd, Sunway Construction Group Bhd, and Gadang Holdings Bhd as beneficiaries of the proposed East Coast Rail Line project. He does not see a rally in construction counters, noting that the market has generally priced in the project expectation.

A construction sector analyst added that the East Coast Rail Line project announcement was within expectation.

“While the allocation for the development of the project is substantial, there has been much discussion about it previously,” he said.

This article first appeared in The Edge Financial Daily, on Oct 24, 2016. Subscribe to The Edge Financial Daily here.

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