The order books of construction players should remain healthy going forward on expectations that the Government will continue to embark on rail projects, with estimated investments for the industry to reach RM160bil by 2020.
News reports yesterday, citing the Land Public Transport Commission (SPAD), said more than RM50bil had been invested in the transportation industry since the 1990s and that investments for the sector could reach RM160bil in another eight years' time.
MIDF Research said construction companies were expected to benefit strongly if all the projects planned under the Urban Rail Development Plan materialised and the feasibility study of high speed rail (HSR) turned out positive.
“The project will not only benefit the big boys such as Gamuda, IJM Corp, MRCB and WCT, it will also benefit the small to mid-cap contractors that have a strong track record and technical expertise in undertaking railway-related works.
“Hence, orderbook replenishment prospects for these contractors are expected to stay bright,” it said in an sector update report yesterday.
This news reinforces the research house's positive view on the sector, especially on the efforts of the Government to increase public investment by embarking on public infrastructure projects.
“There is also an urgency to speed-up the construction of public infrastructure projects as was the case of the first line of mass the rapid transit,” it said. Additionally, MIDF also believes that the RM160bil indicated by SPAD does not include HSR project, based on media reports quoting the Malaysian Industry Government Group for High Technology (MIGHT). “The HSR project is still in the drawing board and is currently at the feasibility study stage.
“According to SPAD, a consultant has been appointed to study the technical, economic and financial viability of the project. The HSR project could cost RM30bil, which means that the total outlay for railway projects in Malaysia may hit RM190bil,” it said.
The expected RM160bil investment is also inclusive of some of the on-going projects. A construction analyst said this spending, either from the Government or the private sector in improving the country's rail network would provide a layer of insulation from the current external pressures from the eurozone and the United States.
“It will not only benefit the construction players but also keep employment rate and support other related industries as well such as cement and steel. Furthermore, for a country of this size and location, the improvement of rail network would be very beneficial to economy when it finally picks up,” he said.
SPAD chief executive officer Mohd Nur Ismal Mohamed Kamal said the RM160bil investment estimate might not entirely come from the Government coffers but it could be from the private sector as well.