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Alliance DBS Research positive on construction sector

KUALA LUMPUR (June 2): Alliance DBS Research has remained positive on the country’s construction sector after both the Malaysian and Singaporean governments agreed to resume discussions on the Kuala Lumpur-Singapore High-Speed Rail (HSR) project soon.

The research house said the discussions would include some of Malaysia’s proposed changes to the commercial and technical aspects of the project.

“We think part of the proposed changes will possibly entails lowering the cost of the project, studying financing solutions, as well as assessing the impact of the Covid-19 pandemic on business travel and the airline industry,” it said.

Alliance DBS Research said to facilitate this, both sides have agreed to extend the deferment of the project from May 31 to Dec 31 which would be the final extension granted for the project.

“We are unsure if there will be further penalty imposed on Malaysia for the latest deferment. It has paid SG$15 million (SG$1=RM3.07) for the first deadline extension until May 31.

“If the project is completely cancelled, a hefty penalty is likely to be imposed on Malaysia,” it said.

It said there is political will from both governments to continue with the project to stimulate the economies of both nations.

The research house said according to a study by the Japan Institute of Developing Economies, the project is forecast to create annual economic benefits worth US$1.59 billion (US$1=RM4.34) for Malaysia and US$641 million for Singapore by 2030.

“In our view, the project’s structure entailing a holistic end-to-end financing, or some form of public and private financing initiative, will be key,” it said.

Alliance DBS Research said contractors with balance sheet strength such as Gamuda Bhd, IJM Corporation Bhd, YTL Corporation Bhd and Sunway Construction Group Bhd should be front runners.

It added that other more direct potential beneficiaries are HSS Engineers Bhd which would likely land a consultancy role and Econpile Holdings Bhd which is one of the more reliable local piling contractors.

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