12MP Hasn’t Done Anything To Pique The Interest Of The Construction Industry

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The traditional brick-and-mortar beneficiaries, including as the construction and infrastructure industries, are significantly absent this time around in the 12th Malaysia Plan (12MP), a five-year plan covering the period 2021-2025, according to PublicInvest Research.

It was stated that this is obvious from the country’s shift toward digital-based infrastructure as future development drivers.

“The 12MP focuses on eight areas likely to drive economic growth over the next half-decade: electronics and electrical (E&E), global services, aerospace, creative, tourism, halal, smart farming, and biomass.” A specific note was also made of the need for a comprehensive reform of the water sector, the enhancement of telecommunications services, and the transformation of the logistics ecosystem for higher efficiency,” the local research firm stated in a report released on Tuesday. Prime Minister Datuk Seri Ismail Sabri Yaakob introduced the 12MP in Parliament on Monday.

While CGS-CIMB Research is generally favourable on the 12MP’s headline RM400 billion development spending allocation, it believes the paucity of information on new megaproject roll-outs in 2022 is unlikely to excite the construction sector.

Ismail Sabri stated in his speech on Monday that the government will continue to operate with limited fiscal headroom in order to undertake new high-impact megadevelopment projects in 2022, but expects a reversal in 2023. It will concentrate on the progress of ongoing contracts that have been hampered by the Covid-19 epidemic in 2022, such as Phase 1 of the Klang Valley Electrified Double Track, the Gemas-Johor Baru Electrified Double Track, and the East Coast Rail Link (ECRL).

The Mass Rapid Transit 3 (MRT 3) and Kuala Lumpur-Johor Baru High Speed Rail (HSR) projects, however, were not mentioned in the 12MP, which CGS-CIMB Research considered a setback, “although we suspect they could re-appear in Budget 2022 on Oct 29 once proper planning and feasibility reviews are in place.”

“HSS Engineers Bhd and Taliworks Corp Bhd are possible beneficiaries of the RM26 billion budget for the water industry, while Gamuda Bhd remains our top pick for the MRT 3 revival,” it said.

CGS-CIMB Research maintained its “neutral” rating of the sector following the 12MP revelations.

Meanwhile, PublicInvest Research predicts that the stock market will remain primarily a trading environment for the time being. “However, it is positive to observe that international investors have been net purchases in recent weeks, implying that regional investor flow may pick up steam if the country’s growth prospects continue to improve.”

The FBM KLCI year-end 2021 closing target of 1,590 points was maintained by the research group. “Our stock recommendations are a combination of cyclical names to capture upsides from eventual economic recovery and business normalcy, and companies are expected to experience multi-year growth stories,” according to PublicInvest Research.

The KLCI was trading at 1,533.75 points in early session on Tuesday.

Published by Zack Baharum

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