CIMB's Analysts said:
- Question mark over RM35.9bn worth of jobs on the west coast. The outcome of the recent general election has cast a pall over the infrastructure sector. Progress of approvals and implementation of the projects could be at risk for jobs in the states of Penang and Selangor, which fell to the opposition. We identify five mega jobs totalling RM35.9bn in Penang and Selangor which could be at risk. Separately, about 30% of overall 9MP allocation has been spent thus far.
- NCER could fall behind other growth corridors. The NCER is likely to take off later than expected as most of the planned infrastructure projects are located in Penang. RM50bn or 28% of the RM177bn allocation is earmarked for infrastructure works. Expectations of greater transparency on the part of the new state government could put the planned projects on hold temporarily.
- Emphasis on companies with growing overseas exposure. Although we are turning cautious on the prospects for the local construction sector, we still like companies that offer greater overseas exposure. We remain positive on the prospects for Gamuda and WCT Engineering as they offer 50-65% earnings exposure to the Gulf states as well as long-term exposure to Vietnam.