“Our immediate focus would be the status of the RM3.3bil allocated for the MRT3 Circle Line (RM32bil total value). We expect more clarity during the re-tabling of the budget, likely in the first quarter of next year, says CGS-CIMB Research.
PETALING JAYA: Analysts are hoping for more clarity on the status of large infrastructure projects under the proposed Budget 2023, after the government suspended funds for flood mitigation projects pending a review.
According to CGS-CIMB Research, the suspension and review of the RM7bil flood mitigation projects may cause a dent in the construction sector as other projects like the Mass Rapid Transit 3 (MRT 3) Circle Line may suffer the same fate.
At this juncture, there are no details of the beneficiaries of the flood mitigation contracts and as such, it viewed this as a negative development for contract outlook for 2023.“Based on our previous pre-15th General Election (GE15) scenario analysis, we have raised the possibility that contract suspension and cancellation or review risks may emerge if a new coalition government comes into power.
“What is unclear from the news is the details of the alleged RM7bil total value of flood mitigation contracts awarded. To our knowledge, since the tabling of Budget 2023 on Oct 22, the disclosed projects have yet to be awarded,” it added.
On Wednesday, it was reported that the Prime Minister has ordered a review of flood mitigation projects after it was found that approvals were given without undergoing the tender process.
Datuk Seri Anwar Ibrahim said the projects were to be put on hold as they were awarded through direct negotiations.
They were part of the RM15bil long-term flood mitigation plan from 2023 to 2030.
Maintaining its “neutral” stance on the sector, the research house said contractors under its coverage did not have direct tender exposure to the construction packages under the Flood Mitigation Masterplan 2030.
However, it said this development may raise concerns over the status of other large-value projects mentioned in Budget 2023.
“Our immediate focus would be the status of the RM3.3bil allocated for the MRT3 Circle Line (RM32bil total value). We expect more clarity during the retabling of the budget, likely in the first quarter of next year.
“We stay sector ‘neutral’ with Gamuda Bhd
and HSS Engineers Bhd as our preferred picks as MRT3 players.
“The downside risks include a review or delay of the MRT3 project. The upside risk will be the revival of MRT 3 tenders,” CGS-CIMB Research said.
Meanwhile, RHB Research is also maintaining a “neutral” stance on the sector. It said although the GE15 is over, thereby removing the political overhang on the sector, it remains to be seen as to how the unity government would handle the country’s fiscal position.
“The status of the RM95bil worth of development expenditure proposed before GE15 is pending the retabling of Budget 2023.
“As such, we cannot discount the possibility of a review of infrastructure projects, mainly the MRT3, which could see a decrease in contract value, while project owners may postpone investment decisions until there is better policy clarity from the government.
“We like names from the small and mid-cap construction space such as Kerjaya Prospek Group Bhd and Sunway Construction Group Bhd. Overall, we believe they can weather the current political climate.
“Kerjaya Prospek has a framework arrangement with Samsung C&T which could enable it to be exposed to more private-sector sophisticated jobs,” it said, adding that it favoured Sunway Construction for its diverse tender book, which consists of internal jobs as well as data centres and factories.
