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| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
The Malaysian construction sector is set for a positive trajectory, largely bolstered by the substantial progress of the East Coast Rail Link (ECRL) project. Analysts at TA SECURITIES have issued a “BUY” recommendation for the sector, with a specific target price of RM0.25, representing a significant upside from the last traded price of RM0.20.
Performance Review
The ECRL project has achieved impressive milestones, with 87% of the project now completed as of August. This robust pace is a key indicator of strong execution within the sector. Furthermore, the value of contracts awarded to local companies involved in the ECRL project has surpassed expectations, reaching MYR18.6 billion, well above the initial target of MYR10.8 billion. Observations along the Gombak-Kuantan stretch indicate well-progressed rail bridge construction and significant development at various station locations. For instance, ECRL Bridge 28 was notably completed in just six months by China Communications Construction Co Ltd.
Future Outlook and Catalysts
The positive momentum is expected to continue with several upcoming catalysts. The next anticipated phase for ECRL involves the 25km spur line connecting Jalan Kastam station to Northport and Westport (Section D). Bids for this section are estimated to range between MYR600 million and MYR900 million, with physical works projected to commence by end-2025 and conclude by December 2027.
Beyond these immediate developments, a broader strategic proposal to extend the ECRL to Rantau Panjang, Kelantan, is under discussion. This extension, along with government plans to attract more investments, aims to establish new logistics hubs and industrial parks along the ECRL route. This initiative is anticipated to create substantial opportunities for contractors involved in industrial building spaces, including warehouses, data centers, and semiconductor manufacturing facilities. Companies with strong track records in these areas are well-positioned to benefit.
Key Risks
Despite the overwhelmingly positive outlook, investors should be aware of potential downside risks. The primary concern remains unforeseen delays to the overall ECRL project completion timeline, which is currently slated for January 2028. Such delays could impact cash flows and project delivery schedules for companies operating within the sector.
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