FW: AmBank Research - Construction :Sector risk premium rise =?us-ascii?Q?s_with_'build_and_finance'_model OVERWEIGHT=2C__16_Nov_2017?=

 

 

SECTOR FOCUS OF THE DAY       

Construction :Sector risk premium rises with ‘build and finance’ model  OVERWEIGHT

 

We are still positive on construction, but risk premium has risen. While maintaining our OVERWEIGHT stance on the construction sector, we are mindful that the market is pricing in a higher risk premium, which is weighing down share prices of construction stocks.

 

We believe the slight de-rating of the sector has been triggered largely by the surprised move by MRT Corp to introduce a "build and finance" model for MRT3 that gives an upper hand to foreign contractors with strong financial backing from their governments – the Chinese and Japanese. After the MRT3 news, share prices of sector bellwether Gamuda and IJM Corp fell as much as 5.9% and 7.5% to RM4.77 (1-year low) and RM2.97 (2-year low) respectively.

 

While seemingly negative, we do not believe the latest development warrants a downgrade. The sector's earnings prospects remain strong with most players sitting on record order books, thanks to the rollout of the Pan Borneo Sarawak highway (RM16bil), MRT2 (RM32bil) and LRT3 (RM12bil). The order backlogs could only go up further over the medium term with another wave of mega projects including the Pan Borneo Sabah highway (RM12.8bil), ECRL (RM55bil) and Kuala Lumpur – Singapore high-speed rail (RM50-60bil).

 

Others :

Tenaga Nasional : MoU with PT PLN to develop power plant                        BUY

Hup Seng Industries : A flat quarter                                                                         HOLD

Sapura Energy : Relief from RM1.5bil contracts                                                   HOLD

 

 

 

QUICK TAKE

Tan Chong Motor : Nissan bounces back from inspection scandal              HOLD

 

 

 

STOCKS ON RADAR

Paramount, Berjaya Food, TRIplc, TAS Offshore

 

 

ECONOMIC HIGHLIGHT

India : Weakening rupee could delay rate cut

 

 

NEWS HIGHLIGHTS

Palette : Eg slams MyEG boss over comments

BHIC : 3Q earnings fall, declares two sen dividend

Nakamichi : Faces risk of delisting on Nov 27

Bina Puri : RM1b infrastructure, construction jobs on the radar

 

 

 

 

DISCLAIMER:

The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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