Highlight CIMB 'overweight' on Malaysian builders ahead of Budget 2016 revision

by **Cals** Wed 20 Jan 2016, 08:59

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[size=28]CIMB 'overweight' on Malaysian builders ahead of Budget 2016 revision

By Sangeetha Amarthalingam / theedgemarkets.com | January 19, 2016 : 1:43 PM MYT

KUALA LUMPUR (Jan 19): CIMB Investment Bank Bhd ([You must be registered and logged in to see this image.] Valuation: 1.65, Fundamental: 0.55) said Malaysia's Budget 2016 revision was "unlikely to be a huge negative" for construction projects, in anticipation the government would continue to spend on high-impact jobs.

In a note today, CIMB analyst Sharizan Rosely said industry players had told the research firm that the budget revision was expected to pose a low risk on major cancellation of projects.

The government will announce the Budget 2016 revision this Jan 28 due to lower crude oil prices. The commodity forms a crucial component of the Malaysian economy and government revenue.

“Government officials preliminarily indicated a 2.3% (RM6 billion) cut to Budget 2016’s RM267 billion total allocation, based on a lower oil price assumption of US$30/barrel versus the original US$48.

“While postponement of selected projects is inevitable, our revisit of the distribution of projects under Budget 2016 shows that more than 90% of the jobs are high-priority. Industry players concurred that the risk of cancellation for these jobs is minimal. MRT 2, LRT 3 and Pan Borneo are among the safe ones, Sharizan said.

Sharizan said builders like IJM Corp ([You must be registered and logged in to see this image.] Valuation: 1.40, Fundamental: 1.30), Sunway Bhd ( Valuation: 2.40, Fundamental: 1.10), Mudajaya Corp Bhd ( Valuation: 0.90, Fundamental: 0.35), Gamuda Bhd ( Valuation: 1.40, Fundamental: 1.00) andBina Puri Holdings Bhd ( Valuation: 2.00, Fundamental: 0.15), which have formed consortiums with Sarawak contractors, were deemed frontrunners for the Pan-Borneo Highway project.

Sharizan said CIMB maintained its "overweight" call for the sector, with Gamuda as its top big-cap pick and Muhibbah Engineering (M) Bhd ([You must be registered and logged in to see this image.] Valuation: 0.80, Fundamental: 1.10) as its preferred small/mid-cap stock.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)
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