RM200b bonanza for M'sian builders draws top fund

Kuala Lumpur

WITH as much as RM200 billion (S$68.8 billion) of building jobs in play, Malaysian construction companies cannot be ignored by any investor, says Danny Wong Teck Meng.

The fund manager - whose Areca Equity Trust Fund beat 98 per cent of its peers over the past three years with a 13 per cent return - has been buying builders' stocks as the government accelerates infrastructure spending across Malaysia. The latest hotspot is Sarawak, where a RM28.9 billion, 1,796-kilometre toll-free highway linking the state and Sabah is being built as a crucial state election looms in May.

"The construction industry will be very exciting as these jobs are expected to be awarded in the next two years. There could be as much as RM200 billion ringgit of jobs out there," said Mr Wong, CEO of Areca Capital Sdn, who correctly predicted this year's slump in tech shares and a rebound in energy companies.

"We can't ignore them. Sarawak stocks are in focus because of the Pan Borneo highway and also the election, where there are bound to be goodies."

Construction firms are trading at the highest level relative to the Malaysian equity benchmark in four years as a building boom takes hold. With an estimated RM136 billion of jobs in the pipeline in 2016, a CIMB Group Holdings Bhd report predicts more gains as share prices haven't fully priced in the earnings potential.

The awards bonanza from rail to roads also comes amid an "election play" on some contractors as Prime Minister Najib Razak's ruling Barisan Nasional coalition bids to retain Sarawak - a state held since 1963 - in polls on May 7.

The Bursa Malaysia Construction Index has risen 21 per cent from an August 2015 low and is priced at 1.2 times net assets - near the most expensive level in almost a year. It's up 3.2 per cent in 2016, beating the FTSE Bursa Malaysia KLCI Index that's fallen 0.6 per cent.

The biggest gainers in the building gauge this year are Ekovest Bhd and Kimlun Corp which have jumped at least 28 per cent. The building gauge rose 0.1 per cent on Thursday, its second day of increases.

Hock Seng Lee, Sarawak's largest builder, has surged 15 per cent from its August low, while Zecon Bhd has rallied 33 per cent from the lowest level last September. BLOOMBERG