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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The development in Iskandar Malaysia is picking up with 2012 as the potential inflection year. Investment targets have been surpassed and foreign participation is coming in. The key sectors to benefit from Iskandar are property and construction.
For Iskandar exposure, OSK recommend UEM Land for the property side given that it is the largest land owner at Nusajaya and KimLun Corp for the construction angle as it has a strong orderbook track record in Johor.
Other names offering Iskandar exposure include SP Setia for its Setia Eco Gardens development, Gamuda for its Horizon Hills development and Sunway which is constructing Legoland and BioX-Cell.
The table below is the target price for selected stocks for Iskandar exposure.
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Real Estate Investment Trust (REIT) becoming popular in Malaysia due to high dividend yield paid by the management company. Currently, there are 14 REITs approved by Security Commission (SC) and listed in Bursa Malaysia.
The main advantage of (REIT) when compare with actual property investment is the investors earn better liquidity and cash flow.
How do they performed? The table below shows the comparison between the 14 REIT available in Malaysia in terms of Market Capitalization, Earnings per Share (EPS) and Dividend Yield for the past 1 year.
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Markets rebounded in March with the KLCI ending 1Q in the black. Moving into 2Q, OSK foresee there will be some short term volatility but they are confident on their year-end KLCI target of 1680 pts.
OSK also advise investors to buy Big Caps on potential rebounds while focusing on the more defensive Small Caps given their superior performance over the past few months. OSK’s favourite sectors remain Banks, O&G, Property and Construction in the mid- to short-term while the longer term buys are Media and Healthcare.
The table below are the target price for April 2011 top picks.
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OSK maintain OVERWEIGHT rating on construction sector, driven primarily by:
(i) implementation of the various projects under the ETP, and
(ii) the potential of more contract awards as the Govt attempts to generate a feel-good factor given the potential of an early General Election.
Gamuda, Mudajaya and KimLun are OSK’s top picks
Below are the target price for selected stocks in construction sector.
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