Affin Hwang Capital cuts construction sector to Underweight

KUALA LUMPUR (Feb 25): Affin Hwang Capital Research has downgraded the construction sector to “Underweight” from Overweight amidst the political uncertainties following the resignation of Prime Minister (PM) Tun Dr Mahathir Mohamad (and his re-appointment as interim PM).

In an update today, the research house said the sector is susceptible to changes in government policies and delays in public-sector project awards.

It explained that the construction companies are reliant on publicsector projects to replenish construction order books as construction demand from the property sector remains weak.

It added that there is also the risk of a change in government that could lead to changes in policy on the government contract awards and infrastructure concessions.

“We cut our target prices for two construction stocks under coverage by increasing the discount to RNAV / lowering our target PER to reflect the higher risks.

“We downgrade Gamuda Bhd to “Sell” from Buy and HSS Engineering Bhd to “Hold” from Buy.

“Sunway Construction Group Bhd is our preferred exposure to the sector; maintain Buy,” it said.

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