Sector Update:
Regional Construction (Overweight),
As Many As Stars In The Sky
Regional Construction (Overweight),
As Many As Stars In The Sky
Although four ASEAN
countries – Indonesia, Malaysia, Singapore and Thailand – are facing the threat
of an economic slowdown, each is relying on different engines to stimulate
their economies. All four countries (based on our survey in each capital city)
still report progress in terms of construction activities from both the private
and public sectors. Our RHB construction analysts maintain their positive view
on the sector with Top Picks as follows:
1.
Indonesia:
Adhi Karya Persero;
2.
Malaysia:
Sunway Construction and Gadang Holdings;
3.
Thailand:
Sino-Thai Engineering & Construction.
¨
Different
engines in different countries. In order to boost their economies and
prevent a slowdown, Singapore and Malaysia are focusing on export growth and
domestic consumption respectively, while Thailand and Indonesia are relying on
investments in public infrastructure projects. In spite of the different
stimulus instruments, construction activities remain abundant within a 3km
radius around the centre of each capital city – we counted many cranes working
actively in our surveyed area. Kuala Lumpur ranks the top among the four, with
131 cranes. Bangkok came in second with 112 cranes. Jakarta and Singapore are
almost equal, with about 66 and 52 cranes respectively.
What
can be learnt from the crane survey?
¨
Indonesia:
Jakarta,
with many infrastructure projects under construction, is set to develop new
projects. This is especially in terms of new skyscrapers aligned with mass
rapid transit (MRT) routes. In the meantime, Indonesia’s residential property
sector has been facing slow demand growth since FY15, which has led to delays
of developers’ new project launches. Still, office and apartment projects under
construction remain on track and are a dominant presence in Jakarta’s central
business district (CBD).
¨
Malaysia:
The
busiest construction activities in this country will not end soon, as the
Government has assured new infrastructure projects will be implemented as
planned. However, there is a likely trend for developers to slow down their
launches for residential and non-residential projects due to the weak property
market. Our analyst believes infrastructure spending by the Government will
boost new construction projects awarded to contractors in FY16-17.
¨
Singapore:
As
the most developed and most congested country among the four (with a
construction cycle that is getting ahead of the others), Singapore is focusing
on quality rather than quantity. There is a growing number of new mixed-use
projects plus energy-efficient buildings. These are supported by planned
construction of more transportation alternatives for a better access to the CBD
area.
¨ Thailand: Bangkok’s CBD is
dominated by SET-listed companies’ condominium projects for the mid- to
high-end market. There are obvious trends in the CBD, including:
i. Facility expansion of long-term growth
businesses such as hospitals and a university campus;
ii. The game of mixed-use projects played by Thai
landlords;
iii. Initial signs that the hotel sector will expand
to a new location in the CBD.
Best
regards,
Dony Gunawan
Assistant Vice
President
Research Analyst – Construction
PT. RHB Securities
Indonesia
