BlueRock Investment
ENGTEX and MKH - PROBABLE BENEFICIARIES OF 2019 BUDGET
PROBABLE BENEFICIARIES OF 2019 BUDGET – ENGTEX and MKH
The 2019 Budget will be tabled tomorrow, 2/11/2019. As usual, there will be beneficiaries and victims arising from this budget. ENGTEX and MKH may emerge as two of the beneficiaries.
ENGTEX (Initiated price: RM 0.92)
The aged underground domestic water pipes replacement work has been long overdue. In August and September 2018, the existing shareholders of water concessionaire in Selangor, SPLASH Holdings has accepted the offer from Selangor government to take over the company. This has cleared some hurdles for the pipes replacement project to be carried out smoothly and efficiently.
In this coming budget, it is expected that a sizable allocation would be made for the project. Engtex will be the biggest beneficiary of the probable project. It is the biggest domestic water pipe manufacturer in Malaysia and it has excessed production capacity to cater for the sudden surge in demand. In fact, Engtex has increased its production capacities of Ductile Iron Pipes and Mils Steel Pipes to cater for this high pipe replacement demand.
MKH (Initiated Price: RM1.23)
Finance Minister, Lim Guan Eng has indicated that measures and incentives will be announced in the 2019 budget to increase the affordable housing ownership. We are hoping that the bank approval requirements will be loosened up and margins of financing could be increased.
MKH should be a major beneficiary from these measures. In fact, MKH has quite many projects that fall under the affordable category. They currently have two PRIMA projects namely PRIMA @ Kajang and PRIMA @ Bandar Teknologi, both in Kajang.
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Discussions
Be the first to like this. Showing 8 of 8 comments
As expected, there are many incentives given to affordable housing ownership in this 2019 budget. The stamp duties of the first RM300k is waived for first time purchasers of residential houses below RM500k.
2018-11-02 23:19
@yanxuan8, MKH is a steady growth counter with good management. It has continuously making quarterly profits without fail since its listing in 1997, 21 years ago. Not a single quarterly loss was incurred.
2018-11-02 23:26
@chlai87
i) You are right, the price of HRC fluctuates. As pipe manufacturing is in a very competitive market, the few manufacturers also will adjust their price according to the raw material price, sometimes weekly. So, normally the manufacturer like Engtex will get quite consistent profit margin.
ii) ERW is just another way to make pipes. Spiral welded pipes are manufactured with physical welding at the joint. ERW is just using electric heating to bond the joint. At the end, the end products are pipes that are quite identical.
2018-11-06 21:49
@trulyinvest, my recommendation is for short to medium term (1 to 3 years).
2018-11-06 21:53
ERW pipes is just normal mild steel pipes or normal steel pipes. They can last for about 25 to 30 years.
For underground water pipes, ductile iron pipes are used because they can last for more than 100 years in normal soil condition.
2018-11-07 00:23
As long as there is no sudden big fluctuations in hot rolled coil price, pipe manufacturers should be quite neutral in profit margin.
2018-11-18 19:35
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2018-11-02 08:35