Construction, Property and Utilities most affected. As can be expected from a development plan, the Construction and Property sectors were the most impacted. While we were pleased to note that there was no cut to the development budget, we also noted the shift to PPP-type projects and remain skeptical that funding can be sourced simultaneously for the LRT extension, Double Track extension and KL MRT projects. We prefer Sarawakian companies for construction play given the continued emphasis in the 10MP.
As for property, while noting that land value could be unlocked with the development of Sungai Buloh, Sungai Besi airport and Kampung Baru, we are concerned that existing commercial property values could be capped if the launch of these new developments is not properly planned.
Finally, on Utilities, the LNG plant and new coal power plants coupled with planned subsidy reductions should help assuage concerns of a looming power crunch although political will is needed in cutting the subsidies.
A selection of beneficiaries. In distilling down the sectoral impact, we believe that among the notable beneficiaries of the 10MP will be:
- MMC – given the possible expansion of its Tanjung Bin coal fired power plant, its possible involvement in the KL MRT and Seremban –Gemas Double Track project and possible funding sources for its Senai High-Tech Park.
- MRCB – given its experience in jointly developing Government lands and possible participation in the development of the Malaysian Rubber Board land in Sungai Buloh
- Naim Holdings – given its strength in Sarawak construction projects
- Hock Seng Lee – given its strength in Sarawak construction projects
The table below shows the current and target price for the stocks.
| Stock | Price (RM) | Target (RM) |
|---|---|---|
| MMCCorp | 2.45 | 2.54 |
| MRCB | 1.5 | 1.75 |
| Naim | 2.9 | 3.52 |
| Hock Seng Lee | 1.5 | 1.63 |
Source : OSK Research
Even before RMK10, all property stocks will be affected by IFRIC 15 effective 1 July 2010.