Malaysia builders to outperform mart

INVESTORS should buy Malaysia’s construction stocks as they will outperform the market this year with the government’s accelerated spending on “mega projects,” said Terence Wong, an analyst at CIMB Investment Bank Bhd.

“Construction is the must-own sector in Malaysia because pump-priming will come through and it will come through aggressively over the next few years,” he said in Kuala Lumpur today. There will be “enough contracts to go around for all companies,” he added.

The government is expected to roll out as much as RM80 billion ringgit worth of infrastructure projects in coming months that may include the extension of the Klang Valley Light Rail Transit, Wong said.

Prime Minister Najib Razak, who took office on April 3, announced stimulus plans valued at RM67 billion (US$19 billion) to restore growth.

The Kuala Lumpur Construction Index of 42 stocks has gained 27 per cent this year, compared with the benchmark FTSE Bursa Malaysia KLCI Index’s 24 per cent advance.

The construction measure is trading at 39 times earnings, almost twice the benchmark indexes’ 19.6 multiple. Wong’s top picks in construction include Gamuda Bhd, IJM Corp and WCT Bhd.

These so-called “mega projects” are “starting to come on,” he said. In May, the government gave out a RM1.3 billion contract to build a tunnel for the Pahang-Selangor interstate water project.

Shares of IJM, which is helping to build the tunnel, have more than doubled this year.

Shares of Gamuda, Malaysia’s second-biggest builder, surged 49 per cent and WCT advanced 53 per cent.

By Bloomberg