The realisation of a few, long-anticipated major projects in Sarawak could generate massive construction works, creating unprecedented demand for building materials in the state, said Maybank Investment Bank Research (Maybank-IB).
The brokerage, which in its report on Tuesday reiterated an “overweight” call on the construction sector, said that Sarawak companies were poised for a re-rating as projects in the state shift into high gear.
Among the major construction works in Sarawak are the RM15bil Pan Borneo Sarawak Highway that kicked off recently; the RM9bil Baleh hydroelectric power project that could take off soon, given the fact that new energy supply is vital to attract new investments into Sarawak; as well as the long-delayed Kuching Centralised Wastewater Management System Package 2 with an estimated cost of RM700mil to RM800mil that should also be awarded soon, since works on the first package have already been completed.
According to Maybank-IB, the positive sentiment on the Sarawak construction sector would gain momentum as the state election loomed.
“There would be a strong pipeline of jobs in Sarawak.
“Based on the major projects’ construction timeline, we expect awards to start accelerating in the second half of 2015 and into 2016, especially ahead of the Sarawak state election which must be held by mid-2016,” Maybank-IB said.
“Historically, the share prices of Sarawak construction stocks have mainly displayed positive trends before the previous state elections,” it pointed put.
The Pan Borneo Sarawak Highway would be the single-largest construction project in Sarawak based on its RM15bil cost.
It is expected to be awarded to Sarawak construction players.
The Pan Borneo Highway is an existing trunk road, and the upcoming construction project involves the widening of a selected portion of the existing three metre-wide single-carriageway into a dual-carriageway.
The total length of the existing Pan Borneo Highway is 2,239km, connecting major towns in Sarawak and Sabah with the Sarawak portion – Pan Borneo Sarawak Highway – being 1,090km in length.
“We also expect more construction works from the Sarawak Corridor of Renewable Energy, new power plants and rural and urbanisation developments.
“These would create an unprecedented demand for both construction services and building materials in Sarawak and enhance earnings visibility,” Maybank-IB said.
The brokerage said Cahya Mata Sarawak Bhd is expected to be the biggest beneficiary of the construction boom in the state.
This was because the company was the major building materials supplier and road maintenance player in Sarawak, while Hock Seng Lee Bhd would stand to win more reclamation/construction jobs, given its niche expertise, extensive machinery fleet and strong track record, it said.