KUALA LUMPUR – Although the termination of the Kuala Lumpur-Singapore High-Speed Rail (HSR) project is a blow to the construction sector, it is only a temporary setback, said Kenanga Investment Bank Bhd.
The research firm has maintained its “overweight” recommendation on the sector, as it expects Covid-19 recovery to increase this year, setting the narrative for an amplified share price reaction upon news flows amid a liquidity-filled market.
Its key predictions and themes for 2021 include more property development launches to benefit building contractors, small caps to outperform big caps in share price performance due to tighter floats, and Light Rail Transit 3 earnings to kick in strongly.
“We are negative (on HSR termination) as the absence of HSR will affect the project’s visibility pipeline in the medium term, and many developments surrounding the HSR alignment may now take a longer gestation period to materialise, such as Bandar Malaysia.
“However, we note that there is a flip side to this, and it may not be as bad as it seems.
“Without HSR, we note that the government’s fiscal purse will be less tight, freeing up higher allocations to other high-impact projects such as the Mass Rapid Transit Line 3 (MRT3),” it said in a note.
To recap, MRT3 had a tentative price tag of between RM45 billion and RM60 billion, but due to concerns about the government’s finances, the quoted price was slashed to RM20 billion on a reduced scope and coverage.
“Hence, if the terminated HSR’s budget were to be rechannelled to MRT3, we would view it positively, as we believe MRT3’s impact post-completion would be more immediate and effective to the economy compared to HSR.”
As at 11am, the Bursa Malaysia Construction Index eased 5.53 points to 181.14.
Among the construction counters, Gamuda lost 12 sen to RM3.77, Sunway Construction bagged 2 sen to RM1.90, MRCB trimmed 2.5 sen to 45 sen, Ekovest slipped 4 sen to 48 sen, Ageson and Top Builders inched up half a sen each to 13.5 sen and 12 sen, respectively, Jaks eased 2 sen to 67.5 sen, while SCBuild was flat at 6 sen.
HSR was terminated after Malaysia and Singapore failed to reach an agreement on changes proposed by the former before the project agreement lapsed on December 31 last year.
In a joint statement by Prime Minister Tan Sri Muhyiddin Yassin and his Singaporean counterpart, Lee Hsien Loong, on Friday, they said Putrajaya proposed the changes due to the impact of the Covid-19 pandemic on the country’s economy.
“Both governments conducted several discussions with regard to these changes, and were unable to reach an agreement. Therefore, the HSR agreement lapsed on December 31, 2020.” – Bernama, January 4, 2021
