Real construction growth for 2011 projected at 4%

KUALA LUMPUR: Real construction growth for 2011 has been projected at 4%, OSK Research said in its 2011 report.

It re-rated valuations upwards for the construction sector fuelled by the possibility of an early general election, implementation of the proposed projects under the Economic Transformation Programme and Budget 2011.

In its research note, OSK Research said the top pick was Sunway with a target price of RM2.72, and within the small cap space AZRB with a target price of RM1.51.

"Investors should pick Gamuda (TP: RM4.31) for the euphoria over the proposed MRT. Lastly, we recommend Naim (TP: RM5.10) for the Sarawak theme," OSK Research said.

In its overview of the construction sector, OSK Research said it was a constructive year for the construction sector.

"The KL Construction Index chalked up a year-to-date return of 24%," it said, adding that a reduction was however expected for 2011 and 2012 development expenditure which would be negative for the sector.

"For 2011, development expenditure is targeted at RM48.5 billion, down 9% year-on-year (y-o-y).

"We expect the negatives of lower development expenditure to be offset by more jobs being implemented via private finance incentives (PFI)," OSK Research added.

It said the momentum of contract awards would continue into 2011 and conservatively set domestic job wins at an estimated RM15 billion.

"Jan-Oct domestic contract awards totalled RM12.1 billion (+66.8% y-o-y) and is very likely to surpass 2010 target of RM13 billion," OSK Research elaborated. — Bernama