Construction firms to gain from Sarawak project

PETALING JAYA: Construction companies such as Hock Seng Lee Bhd, Naim Cendera Holdings Bhd and TRC Synergy Bhd would be the first beneficiaries of the Sarawak Corridor of Renewable Energy (SCORE).

In a company update report yesterday, OSK Research said: “We believe SCORE’s immediate beneficiaries are the construction players as building the necessary infrastructure will be required first, followed by utility players such as Sarawak Energy Bhd as increasing energy demand is needed to support the industrialisation process.”

More housing developments supporting the increasing rural-urban migration and rising income levels would emerge at a later stage, it added.

SCORE, which was the fifth and last development corridor project launched in February, has allocated RM67bil for infrastructure development projects, mostly government-funded.

OSK Research recently brought 16 fund managers to Bintulu, Sarawak, to gain insight on how companies such as Sarawak Energy, Naim Cendera and Hock Seng Lee could position themselves to benefit from SCORE.

“We opine that Hock Seng Lee stands to be a key beneficiary of SCORE by virtue of its strong foothold in the state. The company’s expertise in marine engineering is clearly a plus point given Sarawak’s swampy terrain,” it said.

OSK Research said Hock Seng Lee was likely to gain further margins upside as it secured more jobs as a main contractor as opposed to being a subcontractor.

Hock Seng Lee’s orderbook stood at RM1.6bil, of which over 80% is still outstanding. Its orderbook would keep the company busy until 2010.

Year-to-date, the company has managed to secure some RM868mil worth of jobs, including the RM452mil Kuching wastewater management system job secured last month.

Meanwhile, low-cost housing developer Naim Cendera would also benefit from SCORE as the proposed construction of dams would spur rural-urban migration and relocation of local tribes.

“We will see a lot of potential spillovers in terms of new projects to support one of the largest projects under SCORE, which would be the Salco Aluminium Smelter project in Similajau, that costs about RM7bil or more,” said OSK Research.

The spillover would include the development of new low-cost housing to relocate residents living near the smelter, it said.

With its strong reputation in the low-cost housing segment, Naim Cendera jived well with the rural-urban migration theme in Sarawak, it said, adding that mass market housing remained the key demand segment there.

“Nonetheless, owing to the recent slowdown in Sarawak property market, we project a marginal 4% to 8% growth in sales for its financial year ending Dec 31, 08 (FY08) to FY10,” OSK Research said.

Naim Cendera has also been awarded Phase 1 of a major flood mitigation project in Kuching worth some RM150mil.

OSK Research said economic progress within the three major growth nodes in SCORE, namely Tanjung Manis, Mukah and Similajau, could also have an upward impact on property prices in the areas.

Although the global economic slowdown may have taken its toll in slowing the development of SCORE, the research house believed the availability of cheap power in Sarawak should see investment return, to the benefit of companies such as Sarawak Energy, Hock Seng Lee and Naim Cendera once global credit issues were resolved.

(Taken from biz.thestar.com.my)