OSK Construction Sector Stock Picks, Jan 2012

OSK maintained NEUTRAL on the construction sector despite expectations of stronger contracts in 2012. The elevated portion of the MRT SBK line would already make up for all domestic jobs awarded
last year.

Given that the construction sector has a relatively high beta, OSK advised to remain cautious for now. In the last three major market down cycles in 1997-98, 2000-01 and 2008-09, the KLCON Index underperformed the KLCI by 11-15%. OSK’s top large cap pick is Gamuda (BUY, FV: RM3.94) while for the small caps is KimLun (BUY, FV: RM2.15).

Below are the target price, market capitalization and rating for selected stocks in construction sector.

Stock Price (RM) Target (RM) Market Cap (RMmil) Rating
AZRB 0.67 0.66 185.4 Neutral
GAMUDA 3.49 3.94 7,211.4 Buy
HSL 1.32 1.69 769.1 Buy
IJM 5.59 5.60 7,723.0 Neutral
KIMLUN 1.34 2.15 306.9 Buy
MUDAJAYA 2.21 3.94 1,211.8 Buy
NAIM 1.68 1.56 420.0 Neutral
TRC 0.65 0.76 304.0 Tr Buy
WCT 2.27 2.63 1,827.8 Buy

Source : OSK Research

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