CIMB Research upgrades construction sector to Overweight

KUALA LUMPUR: CIMB Equities Research is upgrading Malaysia's construction sector from Neutral to Overweight and raised all stocks to Outperform with Gamuda and Mudajaya as the top picks.
It
said on Friday, in the medium term, it expects greater conviction on
the part of the government in the rollout of major projects.
“We
scale back RNAV discounts by 10 to 20 percentage points across the
board and raise our target construction price-to-earnings (P/E) from
13.5 times to our new target market P/E of 15.6 times,” it said.
CIMB Research said post elections, public transportation upgrade returns as the key theme for the sector.
“We
expect to see a revival of this theme in H2, 2013. The list of projects
is no different but the scenario has changed in that there is now
continuity of the government's public transport upgrade initiatives
under the Economic Transformation Programme (ETP).
“There
seems to be similar optimism on the ground. SPAD said that the recent
elections have made it even more motivated to continue with the public
transport transformation plan,” said the research house.
It added that the MRT Corp had stated the public should expect more news on MRT 2 & 3 in the coming weeks or months.
CIMB
Research said that political risks have been considerably reduced,
putting the spotlight on the RM40bil to RM50bil MRT 2 & 3, RM30bil
KL-Singapore high speed rail (HSR), various rail and double tracking
upgrades, and the RM8bil Gemas-Johor Baru double tracking.