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Singapore Investment


Renewed interest in property, construction

PETALING JAYA: Compelling valuations, supported by newsflow on the high speed rail (HSR) and new wage polices have fuelled investors optimism in property and construction related counters on Bursa Malaysia.

For example, Mah Sing Group Bhd has seen its share price grow from 61.5 sen on June 23 to close at 66 sen yesterday, after having touched a high of 67.5 sen on July 18.

During the same period, the price for a share in UEM Sunrise Bhd has ballooned from 27.5 sen to 44.5 sen, after reaching a peak of 48.5 sen several days ago.

Other notable performers with significant upwards movement in their share prices are Sunway Construction Group Bhd, Gamuda Bhd and IOI Properties Group Bhd.

According to Rakuten Trade head of equity sales Vincent Lau, the encouraging showing of property counters over the past quarter could be attributed to a number of factors.

“Firstly, we believe the valuations of property and construction counters are low, and therefore it is understandable that there have been many investors who are hunting for bargains and trading opportunities,” he told StarBiz.

The potential revival of the Kuala Lumpur-Singapore HSR by the government could also be a spurring factor, he pointed out, with companies such as UEM Sunrise – with land in Johor – being seen by investors as the main beneficiary if the project gets the green light.

Lau said the stabilisation of the Overnight Policy Rate (OPR) at 3% earlier this month, following its last 25 basis point-hike on May 3, had also prompted investors to seek out other sensible investment alternatives.KAF Research senior analyst Mak Hoy Ken said aside from the broader market and interest rate expectations, the share prices of selective construction and property sectors could have been responding to some rotational trades, with conversely, cement makers seeing a degree of weaknesses recently.

While concurring with the notion that the stabilisation of the OPR – and the expectation by investors that it would remain at 3% for the rest of the year could have influenced the rally – he said the depressed valuations of counters in the property industry has also been a factor in the rotational play.

“We do not think the construction sector’s fundamentals have materially changed heading into the all-important state elections which are due on Aug 12,” he said.

Of particular interest, Mak pointed out that pending the state election results, it is highly doubtful the country would see a significant upturn in major contract flows, as the tender validity for the Mass Rapid Transit 3 (MRT 3) has been again until September, while a potential revival of the HSR is still at a nascent stage.

On the flipside, he said: “The expediting of the Penang Light Rail Transit (LRT) project, which is estimated to cost around RM15bil now from its initial estimate of RM9.5bil, has generated some interest. Also, announcements on the MRT 3 tenders could be made in the first half of next year.”

He said Gamuda has bucked the flattish fundamental outlook of the sector, proffering that the sustained performance of the group’s share price is mainly down to its bold push to diversify its earnings streams beyond the country’s shores.

Additionally, Mak said Gamuda had in the last week announced the acquisition of a prime plot of land in Thu Doc City, which has been touted as Vietnam’s Innovation Hub, and is by far the group’s largest quick-turnaround-project in Vietnam.

Gamuda is poised to gain an immediate order book accretion of RM3.5bil from Silicon Island – which is Island A of the Penang South Island project - once its environmental management plan is approved.

“As the project’s original proponent, it is also in a strong position to be involved –one way or other – in the expanded Penang LRT, which will now be federal-funded,” he said.


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