KUALA LUMPUR, July 20 — RHB Research remained upbeat on the construction and engineering sector given the latest news flow in relation to the Kuala Lumpur - Singapore High-Speed Rail.
In its note, the research firm said Sarawak and Sabah are also progressing well on infrastructure projects such as the Sarawak state-funded Kuching Autonomous Rapid Transit.
Potential near-term catalysts include retendering the Johor Bahru - Singapore Rapid Transit System link packages and approving a Light Rail Transit connecting Penang Island to Seberang Perai.
RHB Research said it prefers contractors with diversified job portfolios and from the catalysts from the abovementioned projects, it retains Gamuda, Sunway Construction and Kerjaya Prospek as its top picks.
This is given their steady job replenishment trend and strategic hedge against any downside risks from the domestic construction landscape amid their commendable exposure in overseas jobs (for Gamuda) and also private industrial ones (for Sunway Construction and Kerjaya Prospek).
“All in, we retain our 'overweight' call. We advocate investors to be selective on counters that have credentials in local public infrastructure projects while still having decent exposure either in overseas markets or private industrial jobs in addition to having a lean balance sheet (net cash or manageable net gearing positions),” said the research firm.
Such attributes are crucial to weathering any downside risks which may arise in the form of unexpected labour shortages, slow rollout of public infrastructure projects in Malaysia and prolonged periods of building material costs.
— Bernama
