Stock Name: NAIM
Company Name: NAIM HOLDINGS BHD
Research House: AMMB
Sarawak construction sector
Overweight; top picks are Naim Holdings Bhd at fair value of RM4.60 and Hock Seng Lee Bhd (HSL) at fair value RM2: We highlight Sarawak's deep development potential as a cornerstone theme for the construction sector.
Recent corporate manoeuvres have sparked interest in Sarawak plays. 1Malaysia Development Bhd recently signed a landmark deal with State Grid Corp of China to jointly invest US$11 billion (RM36.5 billion) in Sarawak. Such a move may be a prelude to stronger contract flows in Sarawak ahead of its state elections. This move would likely spin off job opportunities for top Sarawakian contractors - Naim, HSL and Cahya Mata Sarawak Bhd, as well as select steel fabricators such as KKB Engineering Bhd.
The Sarawak Corridor of Renewable Energy (Score) is one of Malaysia's five growth corridors with total targeted investments of RM334 billion. More importantly, allocation for basic infrastructure is crucial to support these huge investments - with RM65 billion being budgeted under Phase 1 of Score's implementation (2008-2015). Tenders for the Murum access roads (five packages) will be dished out simultaneously. Key areas of spending are: 1. At least RM4 billion-RM5 billion worth of road jobs up for grabs. These include two major access roads under Score - Murum (RM800 million) and Nanga-Merit (RM1.4 billion).
2. Water infrastructure. Naim is working hard to convert letters of intent for the remaining packages of the Kuching flood mitigation project (RM1.1 billion) into actual awards. Likewise, HSL is a leading candidate for balance of works worth RM2 billion under the Kuching sewerage project where it is already involved in initial works for Phase 1 with Nishimatsu of Japan.
3. Other notable jobs. We expect more concrete news flow on the status of the Mukah Airport extension worth RM600 million in the coming months. Also on the cards is a proposed Tg Manis port expansion worth RM350 million with HSL a potential beneficiary due to its prior track record of completed projects in the area (the RM300 million Tg Manis deepsea fishing port). Naim is in advanced negotiations for a proposed RM167 million Bengoh dam resettlement. A decision could be made by 2Q10.
A major draw card of Score is the ability to provide cheap power to heavy industries with a portion to be supplied to Peninsular Malaysia. So far, only two hydro dams are being built - Bakun: 2400MW, Murum: 944MW - against a total hydro potential of 20,000MW (2020 target: 10,000MW).
However with Sarawak's own rising future requirements, this may prod the state to ramp up rollout of five new hydro dams worth RM13 billion to plug the gap.
We do not discount a consortium being formed between foreign and local contractors - possibly Loh & Loh Corp Bhd - in bidding for these jobs. - AmResearch, March 23
This article appeared in The Edge Financial Daily, March 24, 2010.
Company Name: NAIM HOLDINGS BHD
Research House: AMMB
Sarawak construction sector
Overweight; top picks are Naim Holdings Bhd at fair value of RM4.60 and Hock Seng Lee Bhd (HSL) at fair value RM2: We highlight Sarawak's deep development potential as a cornerstone theme for the construction sector.
Recent corporate manoeuvres have sparked interest in Sarawak plays. 1Malaysia Development Bhd recently signed a landmark deal with State Grid Corp of China to jointly invest US$11 billion (RM36.5 billion) in Sarawak. Such a move may be a prelude to stronger contract flows in Sarawak ahead of its state elections. This move would likely spin off job opportunities for top Sarawakian contractors - Naim, HSL and Cahya Mata Sarawak Bhd, as well as select steel fabricators such as KKB Engineering Bhd.
The Sarawak Corridor of Renewable Energy (Score) is one of Malaysia's five growth corridors with total targeted investments of RM334 billion. More importantly, allocation for basic infrastructure is crucial to support these huge investments - with RM65 billion being budgeted under Phase 1 of Score's implementation (2008-2015). Tenders for the Murum access roads (five packages) will be dished out simultaneously. Key areas of spending are: 1. At least RM4 billion-RM5 billion worth of road jobs up for grabs. These include two major access roads under Score - Murum (RM800 million) and Nanga-Merit (RM1.4 billion).
2. Water infrastructure. Naim is working hard to convert letters of intent for the remaining packages of the Kuching flood mitigation project (RM1.1 billion) into actual awards. Likewise, HSL is a leading candidate for balance of works worth RM2 billion under the Kuching sewerage project where it is already involved in initial works for Phase 1 with Nishimatsu of Japan.
3. Other notable jobs. We expect more concrete news flow on the status of the Mukah Airport extension worth RM600 million in the coming months. Also on the cards is a proposed Tg Manis port expansion worth RM350 million with HSL a potential beneficiary due to its prior track record of completed projects in the area (the RM300 million Tg Manis deepsea fishing port). Naim is in advanced negotiations for a proposed RM167 million Bengoh dam resettlement. A decision could be made by 2Q10.
A major draw card of Score is the ability to provide cheap power to heavy industries with a portion to be supplied to Peninsular Malaysia. So far, only two hydro dams are being built - Bakun: 2400MW, Murum: 944MW - against a total hydro potential of 20,000MW (2020 target: 10,000MW).
However with Sarawak's own rising future requirements, this may prod the state to ramp up rollout of five new hydro dams worth RM13 billion to plug the gap.
We do not discount a consortium being formed between foreign and local contractors - possibly Loh & Loh Corp Bhd - in bidding for these jobs. - AmResearch, March 23
This article appeared in The Edge Financial Daily, March 24, 2010.
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