Ready for 2H2024 Projects Roll-out. The sector is set for sustained growth in the near term, driven by an impressive RM90bn allocation for DE, 40% is set to be implemented in 2H2024. Moreover, the recent diesel subsidy rationalization is expected to bolster the government's fiscal capacity, enabling the initiation and acceleration of infrastructure projects. These include the anticipated announcements for projects namely Phase 1B of the Sabah Pan Borneo Highway, flood mitigation initiatives, reinstated of LRT3 stations, Penang Airport expansion and PLUS highway expansion. For MRT3, we expect the earliest tender awards to take place in 4Q2024 as the project is currently undergoing land acquisition process. Within our coverage, Gabungan AQRS (BUY, TP: RM0.49) is wellpositioned to benefit from these initiatives, particularly through its involvement in public projects (>70%) and leveraging on associate company, SEDCO Precast Sdn Bhd. AQRS also stands to gain from the roll-out of the Sabah Pan Borneo project.
Thrives on Industrial and Data Center Wave. Construction sector landscape has been bolstered by private-sector ventures, fueled by substantial investments in semiconductor foundries and data centers, thanks to our competitive land and energy costs. We see ample opportunities in this segment, with more land acquisition and allocation set up to meet rising demand. Additionally, the development of government special incentives for AI data centers would further drive growth which offer numerous lucrative contracts for companies already on the bandwagon, including those under our coverage, such as SunCon and Gamuda. Additionally, the influx of technology firms and the subsequent need for industrial facilities offered substantial opportunities. Meanwhile, Kerjaya, with its strong contractor reputation in the northern region, is well-positioned to capitalize on these opportunities. The development of Batu Kawan Industrial Park 2 could provide significant job prospects for the company, leveraging on its partnership with Samsung C&T to explore further opportunities in the industrial segment.
Growth in Renewable Energy. We also anticipate an uptick in contracts for energy-related projects, offering significant engineering, procurement, construction, and commissioning (EPCC) opportunities. Notably, the ongoing tender process for LSS5 offer largest capacity (2GW) allocation under the program thus far and Corporate Green Power Programme (CGPP) is expected to award EPCC contracts valued at up to RM2.0bn. SunCon remains well-positioned due to its substantial involvement in these projects. Concurrently, the rollout of Third-Party Access (TPA) in September 2024 will enable independent power producers (IPPs) to sell electricity directly to consumers, creating opportunities within the industry.
Maintain OVERWEIGHT. We remain bullish on the sector, driven by resurgence in domestic infrastructure, robust expansion in data centers and industrial foundries, topped by sustained growth in renewable energy. We reiterate our BUY call for AQRS (TP:RM0.49), SunCon (TP:RM4.01) and Kerjaya (TP:RM2.03) and TAKE PROFIT for Gamuda (TP: RM6.53).
Source: BIMB Securities Research - 17 Jul 2024
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SUNCONCreated by kltrader | Aug 28, 2024
Created by kltrader | Aug 20, 2024