Neutral Outlook for Construction Sector in 2014
compared to RM5 billion in
2012
Property Transactions Likely
to Decline Amid Stringent
Loan Conditions
Nevertheless, Alliance
Research expects 2014
to witness higher foreign
contract awards for
Malaysian companies as it
perceives contractors are
likely to venture overseas to
bid for construction works,
given the slowdown in the
domestic construction
sector.
Despite higher value of
construction contracts
awarded in the fourth
quarter (4Q) of last year, the
perspective for the sector is
expected to remain neutral
this year.
Alliance Research Sdn
Bhd (Alliance Research)
in a report said domestic
contracts for 4Q13 stood at
RM4.9 billion, which is 52%
higher year-on-year (y-o-y)
and a 14% increase quarteron-quarter.
However, for the full year
of 2013, it said domestic
contract awards which
totalled RM15.4 billion
decreased 45% y-o-y
compared to 2012.
This was due to higher
contracts award related to
Mass Rapid Transit (MRT)
projects, the largest being
the RM8.3 billion tunnelling
works in 2012.
For 4Q13, it observed that
some of the Sarawakian
companies which
have secured notable
construction works include
Hong Seng Lee Bhd, KKB
Engineering Bhd and
Sarawak Cable Bhd.
To recap, Hong Seng Lee
was awarded a RM54
million contract for the
infrastructure works for
Demak Laut Industrial Park
and a RM87 million raw
water pumping station at
Tanjung Manis in October
last year.
In November, Sarawak
Cable was awarded RM619
million worth of contracts
for power transmission
lines projects connecting
Mapai and Lachau and
Lachau to Todong and KKB
Engineering was awarded
a contract for phase one of
the water supply project in
Tanjung Manis.
The research firm expects
2014 to witness a decline
in domestic construction
contract award and sets full
year target at RM13 billion.
Alliance Research believes
that with fiscal tightening
soon to be implemented by
the government, a slowdown
in government-related
projects is inevitable as the
government is now more
cautious on its spending.
It observed that over the
last five years, on average,
government-related projects
made up 72% of the total
contract awards for the
construction sector. As for
the private sector contracts,
it noted that there is a risk of
a slowdown as well.
For foreign construction
contract, Alliance Research
pointed out that there
was just one project
announced in 4Q13, which
was upgrading works for
Phnom Penh and Siem Reap
airports.
It observed that for 2013,
foreign contract awards
stood at RM1.2 billion
As for peninsular
companies, the research
firm cited that Gamuda
Bhd’s earnings growth will
be supported by the MRT
project and the potential
enhancement from the
recent acquisition of Kesas
Holdings Bhd, operator of
the Shah Alam Highway,
while it said Ahmad Zaki
Resources Bhd is expected
to benefit from the award of
Bumiputera projects.
Hence, given the potential
slowdown of construction
contract awards this year,
Alliance Research maintains
its neutral outlook for the
sector.
Real Estate and Housing Developers Association (REHDA)
Penang Chairman, Datuk Jerry Chan
Property transactions
are likely to decline
this year amid cautious
sentiment and stringent
housing loan regulations
by financial institutions.
Real Estate and Housing
Developers Association
(REHDA) Penang
Chairman, Datuk Jerry
Chan said the property
market was likely to
register a decline in both
sales and value. The
market is likely to see a
20% decline in value.
Chan said the central
bank’s move to tighten
consumer loans were
likely to impact the
property market and
between 80% and 90%
of prospective buyers
depended on loans to
purchase houses.
Besides, he said buyers
were also becoming
more cautious this year
given the backdrop
of rising living cost.
However, Malaysia’s
property market was
still bullish as the
segment was driven by
low interest rates and
economic growth.
He explained that 2014
would be a good year
for buyers to purchase
properties despite
the uncertainties. And
developers would sell
new products at new
cost and land value amid
rising construction and
labour costs.
Chan also said
developers were
concerned over project
delays amid the labour
shortage following the
major crackdown on
illegal immigrants.
...2014 would be a good year for
buyers to purchase properties
despite the uncertainties. And
developers would sell new products
at new cost and land value amid
rising construction and labour costs.
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