AZRB


OSK maintaining an OVERWEIGHT rating on the construction sector as its underperformance is unjustified given the strong contract wins in 2012. Based on tracking of jobs flow on Bursa Malaysia, Malaysia’s public-listed contractors had secured close to RM25bn worth of contracts as of 9M12.

Things certainly look rosier for 2013, during which more meaningful earnings contribution from works carried out on the KV MRT may be expected.

OSK continue to like Gamuda (BUY, FV: RM4.90) among the big caps counters and KimLun (BUY, FV: RM2.46) for small-cap counters.

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

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In view of the bullish sentiment in global equity markets as well as the increasingly upbeat sentiment on the construction sector fuelled by the flow of positive news, OSK is maintaining OVERWEIGHT call on the sector.

There are plenty of trading opportunities in the run-up to the official awards of contracts by the Government.

Given the ruling Government’s focus on getting a two-thirds majority in the upcoming General Election, OSK do not expect further delays in the implementation of these mega billion-ringgit infrastructure projects as the ruling coalition goes all out to win the hearts and votes of the rakyat.

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

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As the much anticipated 13th general election draws near, OSK see the Government dishing out more contracts to create a “feel good” climate in the run-up to the polls.

News relating to mega projects such as the KL MRT, WCE, EDT and potentially SCORE, should gain traction and hence present investors – who are increasingly becoming more upbeat – with trading opportunities aplenty.

As such, OSK upgrade our sector call from Neutral to OVERWEIGHT as the rush of positive news in the next few months is likely to fire up the sector to new highs this year.

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

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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.

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OSK expect will better in 2H and maintain OVERWEIGHT to the sector. Despite the weak numbers on domestic contract flows in 2Q, OSK remain bullish on the sector. The KLCON has underperformed the KLCI by 4.3% YTD as investors have probably gotten impatient on the momentum of awards.

OSK views this as an opportune time to load up on the sector as contract awards should pick up in 2H as major projects such as the MRT, LRT and River of Life kick off.

The sector should also benefit from a potential early General Elections which we expect to be held this year.

Below are the target price for selected stocks in construction sector.

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