Builders look forward to busy year

The domestic construction sector is expected to perform better this year with large infrastructure projects and housing construction activities expected to underpin growth.

Industry observers said builders would welcome the Year of the Dragon with open arms knowing that the sector is likely to perk up after the impending elections at the end of the first quarter of this year.

In the last budget announcement, the government has made known of its intention to boost the construction sector's growth by seven per cent to drive the national economy this year.

It is an ambitious target, especially when the Malaysian construction industry is set to grow by a bullish RM92 billion this year from RM85 billion last year.

Growth declined for the most part of 2011, expanding by only three per cent in the third quarter of as most large scale projects mooted by the government were deferred.

"This (the slowdown in 2011) is attributable to the slower-than-expected rollout of projects. New domestic contracts in the first nine months of 2011 only amounted to RM49.4 billion, which is only 58 per cent of 2010's full year total of RM85.2 billion and 2007 to 2010 average of RM84.7 billion," said Malaysian Rating Corp Bhd (MARC) vice president of ratings Rajan Paramesran.

This, he said, was unlike 2010 which was boosted by the announcement on the Economic Transformation Programme (ETP) and led the construction sector to rebound to 5.6 per cent.

However, the industry is expected to see a fourth quarter boost in construction activities as seen in previous years to elevate the full-year industry growth to around four per cent in 2011.

Hence, economists believe that timely awards and implementation of projects as per the 10th Malaysia Plan (10MP) and the ETP from now will contribute positively to the growth in 2012 as the projects require gestation period in order to generate impact to the economy.

According to Rajan, various packages for the construction of the Greater KL Mass Rail Transit (MRT) line project that have already been tendered out will contribute to the construction sector's performance.

Tender for the largest package, the tunnel works, worth RM8 billion will close by this month and the award is expected to be finalised by middle of this year.

In addition, government funded rural infrastructure development projects, the KLIA 2 project, the Kuala Lumpur International Financial District, and development of he government's Sungai Buloh rubber land, and the Sungai Besi Kuala Lumpur Air Base will provide momentum to the sector, he added.

RAM Holdings Bhd group chief economist Yeah Kim Leng said although the Malaysian economy is expected to moderate this year because of the ongoing eurozone debt crisis, the construction industry is expected to remain well supported by continuing infrastructure-related and property development projects.

"Key pillars will continue to be construction projects earmarked under the five development corridors and the 12 National Key Economic Areas (NKEA), especially the various transportation infrastructure and property-related mega projects planned under the Greater Kuala Lumpur NKEA," he said.

Yeah said the commencement of the mega MRT project and extension of light-rail transit (LRT) systems together with major investments in the oil and gas sector by Petronas, the national petroleum company, in Peninsular Malaysia, Sabah and Sarawak, are expected to boost construction order books.

Entry point projects such as the River of Life project and other iconic projects planned under the Greater Kuala Lumpur NKEA as well as large infrastructure and utilities projects such as the Gemas-Johor Baru electrified double-tracking project are expected to sustain the country's construction activities.

"Start-ups of affordable housing projects under the aegis of the government, continuing medium and high-end housing construction as well as commercial property development projects in the nation's capital as well as in other major cities are anticipated to lend support to the moderately strong pace of construction industry growth anticipated this year," he added.

Apart from the Gemas-Johor Baru double tracking rail project, other new projects that will kick off this year include several highway projects to be implemented under the Second Rolling Plan (RP2).

Among the projects are the Lebuhraya Pantai Timur Jabor-Kuala Terengganu, Lebuhraya Pantai Barat Banting-Taiping, Lebuhraya Segamat-Tangkak and Lebuhraya Central Spine as well as the construction of Kota Marudu-Ranau road.

The RP2 is the government initiative under the 10th Malaysian Plan (10MP) to boost investment with an allocation of RM98.4 billion for 2012 and 2013.

According to Yeah, a further RM978 million would be allocated to accelerate the development in five regional corridors this year.

Among the projects to be implemented are the construction of Johor Baru-Nusa Jaya coastal highway in Iskandar, Johor, heritage tourism development in Taiping in the Northern Corridor, agropolitan scheme in Besut in the East Coast Economic Region, palm oil industrial cluster project in Lahad Datu in Sabah Development Corridor, and Samalaju water supply in the Sarawak Corridor of Renewable Energy.

In the 10MP, the government allocated RM20 billion under the public-private partnerships (PPP) Facilitation Fund that provides a tipping point to assist the private sector develop projects with strategic value.

Of this total, RM18 billion is for high-impact projects, while the remaining RM2 billion is for projects involving bumiputera entrepreneurs.

This year, the government will allocate RM2.5 billion under the fund and an estimated RM300 million is for bumiputera entrepreneurs.

Rajan noted that the private sector will likely play a significant role in construction growth in 2012.

"Furthermore, the government has been emphasising private participation to drive the economic transformation agenda," he added.

A total of 52 projects worth RM62.7 billion have been identified under the new PPP initiative.

The PPP concept would include leases, joint ventures and sale of government land for development, and the normal build-operate-transfer mode.

Project bankability, he said, depends largely on the PPP terms as the private sector has to finance the construction or development and take on the project risks.

Among these PPP projects are seven tolled highways worth RM19 billion, comprising the West Coast Expressway, Guthrie Damansara Expressway, Sungai Juru Expressway and Paroi-Senawang-KLIA Expressway.

Also included are two coal electricity generating plants (RM7 billion) and 1,335 hectares of development in Sungai Buloh (RM10 billion).

However, while the government is banking on the momentum of private investment to enhance the economy in 2012, Rajan said, foreign direct investment (FDI) inflows may be susceptible to the challenging global economic conditions.

Yeah, meanwhile, said that given the one to two years gestation period for FDI projects, the strong pickup in inflows recorded over 2010 and 2011 will translate into start-up of construction activities this year, especially for greenfield projects involving construction of industrial buildings and facilities.

"For 2012, locally owned corporations such as UDA Holdings Bhd and Gamuda-MMC consortium are more likely to be the ones undertaking the major projects," he added.

By Business Times

More than 90 projects worth billions to be farmed out by April

After some dithering, the construction of the My Rapid Transit (MRT) project is moving into higher gear. The two major contracts awarded by MRT Co last week that totalled some RMl.6bil is proof that things are moving.

What's to come is more telling. By April, MRT Co, the overseer and project owner of the country's largest ever infrastructure project, would have awarded a total of around 90 or so projects. The figure of these contracts run into billions and would clearly be a major boost to the construction and related sectors.

The multiplier effect on the economy will soon be felt.

“We have been waiting for this, as these projects have already been earmarked by the Government before. The industry and the country need these projects to spur economic growth, in light of the gloomy global scene. The multiplier effects are well spelt out,” says Master Builders Association Malaysia (MBAM) president Kwan Foh-Kwai.

While research houses have yet to make an outright bullish call on the construction and related sectors, there are hints that a re-rating is in the offing. Among the larger contracts that are being dished out are for elevated civil works that entail the building of viaduct guideways and other associated works. There are eight of these packages, each averaging RM500mil, according to MRT Co.

However, the two that have already been awarded recently to IJM Corp Bhd and Ahmad Zaki Resources Bhd were for RM974mil and RM764mil respectively, indicating that the RM500mil figure could be on the low side.

There are also contracts for stations and depots. And the single biggest one will be for tunnelling works for the 9.5km underground portion of the Sungai Buloh-Kajang MRT line.

The bill for this is estimated at 40% of the total project cost, which is estimated at RM30bil. The first line stretches 51km.

“The positive news from MRT Co reinforces our positive view on the construction sector as we expect a lot of sizeable projects to be awarded this year,” wrote MIDF Research in a recent note.

OSK Research said that if it did turn positive on the Malaysia market, construction would be one of the sectors it would be bullish about.

Its research head Chris Eng says: “If global markets hold up, the improved risk-taking sentiment will provide a boost to construction stocks, given that the MRT awards will happen this year.”

But are the contracts being farmed out too hurriedly? And what assurance is there that the right parties are winning the awards? These are valid concerns, considering that Malaysia has a questionable track record when it comes to the building of large infrastructure projects in terms of contractors' ability to deliver the goods in time and within budget. In the past, a massive amount of money had been spent by the Government in bailing out the two light rapid transit (LRT) operators and the monorail project.

Federation of Malaysian Consumers Associations secretary-general Muhammad Sha'ani Abdullah says:“Caution should be taken to ensure that the best and deserving companies are awarded the deals. We don't want situations where companies chosen later fail to carry out the projects within budget and time. And these companies then end up getting bailed out by the Government, as had happened in other infrastructure projects in this country.”

But MRT Co CEO Datuk Azhar Abdul Hamid explains that the plan to get these contracts awarded by April is to ensure that the MRT (since renamed Klang Valley MY Rapid Transit or KVMRT) isn't delayed.

“We are already about six months behind schedule and also want to make sure we can deliver the project ahead of the expected completion time in July 2017. There is nothing wrong to speed things up as we do not rely on one company to do the work and that's why we are spreading it out. The most important thing is coordination and supervision,” he says.

Rigorous selection process

Azhar explains that a rigorous process is involved in deciding which companies are awarded with the contracts. In fact, the selection process dates back to even before Azhar, the former head of Sime Darby's plantation division, was made chief executive of MRT Co last August.

Syarikat Prasarana Negara Bhd (Prasarana) which was first tasked with managing the KVMRT project, had earlier called for parties to express their interest in participating in the works for the KVMRT. That was back in 2010 and by September 2011, Prasarana had decided on the “pre-qualification” list for all the different packages involved in building the KVMRT.

According to Azhar, the bids which are then submitted by the pre-qualified contractors are first evaluated by a working committee chaired by both MRT Co and the Project Delivery Partner (PDP) to gauge applicants' technical and financial capabilities. One unique feature of the KVMRT project is the presence of the PDP. In late 2010, a Gamuda-MMC consortium, who had first pitched a plan of the MRT to the Government in the early part of that year, had been appointed as PDP consultants for the MRT project.

The PDP bear certain management risks in this project and are therefore key stakeholders in the KVMRT. Hence it has a say in the decision-making process of contract awards.

From there, the applications go on to a one-stop technical committee chaired by Azhar.

“Finally, we will present the outcome of these evaluations to the one-stop procurement committee to be chaired by three different persons depending on the contract value.”

The chairpersons include Finance Ministry secretary-general for contracts up to RM50mil; the Second Finance Minister (up to RM300mil) and the Prime Minister for contracts worth more than RM300mil.

Checks and balance

Additionally, the KVMRT project has two very notable checks and balances in place to minimise the Government having to provide additional funding in the event contractors can't deliver. First is the role of the PDP. Explains Azhar: “Under the PDP environment there's a step-in clause where if the contractors fail to undertake and continue doing the jobs, the PDP is obliged to come in and get the job done.”

Azhar adds that in cases where there are cost overruns, it is only to be expected that the PDP will also be penalised for that. “In the case of variation orders, we will only look at very exceptional cases,” Azhar says.

Aside from the PDP, there's also the role of the independent consulting engineer or ICE. It has been reported that Prasarana had already issued a letter of intent to engineering firm HSS Integrated Sdn Bhd in a JV with SNC Lavalin (of Canada) to take on the role of ICE. HSSI was previously involved in the design, construction and supervision of the KL International Airport, the Light Rail Transit System 2, the North-South Expressway, Maju Expressway and the Express Rail Link.

Azhar says the role of the ICE is crucial as it will monitor the progress of the project and its input is needed before contractors are paid. It is also tasked with safety aspects of the project.

Still on the issue of the PDP, recall that the appointment of Gamuda-MMC as the PDP for the KVMRT project had caused some controversy, considering that they are also bidding for the tunnelling portion, which is single biggest contract in building the MRT.

Azhar explains that it is Gamuda and MMC who has first come up with the MRT proposal to the Government and they have from the start indicated their keenness to be involved in the tunnelling portion of the project.

“To ensure proper due diligence and that the Government is getting the right pricing for the tunnelling portion, that's the basis of having the Swiss Challenge method for picking the tunnelling contractor,” Azhar says.

To date, five groups of companies, including the Gamuda-MMC JV, have been shortlisted for the tunnelling job. If Gamuda-MMC wins the tunnelling job, it would step out of the PDP role relating to that part of the project. Under the Swiss Challenge system, MMC-Gamuda will have the first right of refusal to do the job at the lowest bid plus a small 2.5% to 7.5% margin. Curiously, this has not stopped other parties from making a bid.

“Take note that the other bidders for the tunneling job are made up of two Chinese, one South Korean and one Japanese company. Aren't they also able to have advantages of economies of scale and possibly government funding on their part?” Azhar notes.

Crucial issue of funding

As the KVMRT goes into high speed, many are still questioning if the country can really afford a project as ambitious as this. It is estimated that the first line of the KVMRT would cost around RM30bil. But he says: “The Government will finance the entire line 1 (Sungai Buloh-Kajang) via bond issuances. That will be done very soon. In the mean time, if we need money, we can used short-term financing from financial institutions which can then be converted into bonds later on. We expect good response for the bonds as there is a lot of liquidity in the market as well as investors are looking at Asia now as the situation the West is not quite healthy.”

Azhar says that it will be Dana Infra that will be raising the bonds.

It has been reported that a special unit of the Finance Ministry called Dana Infra Nasional Bhd (Dana Infra) has been set up to issue bonds to raise the financing for the MRT building cost. Checks with Government sources reveal that Dana Infra is headed by Fazlur Rahman Ebrahim, who is the current managing director of Prokhas Sdn Bhd, itself a unit of MoF that was set up in 2006 to manage the residual assets of Danaharta.

Fazlur has yet to respond to queries from StarBizWeek on the planned bond issuance. Sources, however, have indicated that these bonds would be fully government-backed.

The Government has stated in the past that the rationale for the KVMRT being government-funded is on the basis of the multiplier effects it would have on economic growth in the country and the competitive advantage that the Klang Valley would have once the MRT was up and running

It had also been reported that while the MRT was not going to be profitable, there would be a strong focus to reduce its cost and this was where a “rail plus property” plan had been cited before, where some level of real estate development would be emarked on to recoup some of the losses from the MRT. Another non-fair revenues would be sought such as from advertising.

StarBizWeek had previously quoted economist Dr Yeah Kim Leng of RAM Holdings, who opined that assuming RM30bil is raised by the Government via bonds to the fund the MRT, it will raise the Government debt-to-GDP ratio by 3.9 percentage points to 57% based on the 2010 gross domestic product (GDP) figure.

He said when compared with the debt situation of many advanced economies where the debt levels are either close to or above 100% of GDP, the Government does have the borrowing capacity. He had also said that the bond issuance of RM30bil would raise the fiscal deficit by an estimated 0.2% of GDP which “may necessitate either a cut-back in spending on other areas or raising revenue through means such as asset sales or tax increases, in order to achieve the fiscal deficit target of less than 3% of GDP by 2015,” he reportedly said.

On a positive note, Yeah had added that the MRT project would “boost the economy by adding jobs and crowding-in investment which would have the desired effect of enlarging the GDP, thereby contributing to either stabilising or lowering the debt-to-GDP ratio”.

Those following the KVMRT saga would also be aware of the problems Azhar and his team faced when securing the allignment in some parts of the city centre. There were quarters who opposed the development of the KVMRT. Azhar is confident that the problems would eventually be ironed out. His message has been consistent: that MRT Co isn't interested in taking land in places like Chinatown, except for the station. “We just need the time for them to vacate the area with compensation for six months for us to do the tunnelling works underground.”

But Azhar goes on to say:”Some people just refuse to understand.”

The KVMRT though, is going ahead and Azhar is winning the battle with the majority of land owners having inked agreements to facilitate the MRT allignment. “A lot of efforts are being made on our part to do this correctly. We will get there,” he ethuses and is hopeful that the July 2017 target for the first line of the KVMRT would be achieved.

By The Star

MBAM bullish on construction sector

DESPITE the global economic uncertainty, the Master Builders Association Malaysia (MBAM) is bullish about the growth of the local construction industry in 2012.

The Malaysian construction industry is expected to grow to RM92bil this year from RM85bil last year,” says MBAM president Kwan Foh Kwai.

“However, with the uncertainty of the global economy and the expectation that the property sector may be less robust, MBAM is cautiously optimistic that the construction industry outlook for 2012 will be relatively stable, backed by the continued implementation of projects under the 10th Malaysia Plan (10MP) and the Entry Point Projects (EPP) under the Economic Transformation Programme (ETP),” he adds.

Kwan says the timely awards and implementation of projects under the 10MP and ETP will contribute positively to the growth in 2012, as the projects requires a gestation period to generate impact to the economy.

“A continued conducive environment for doing business in the country, clear guidelines and timelines for approval processes and a level playing field will definitely help spur growth and investment in Malaysia.

“This planned and progressive awarding of projects will reduce any abrupt increase in demand for building materials and manpower, which may jeopardise the targeted growth due to temporary shortages in supply. This will also prevent unnecessary price increases which will add burden to contractors,” he says.

Analysts, meanwhile, are pretty upbeat about the outlook for the construction sector, in light of the call for tenders of the Klang Valley My Rapid Transit (MRT) jobs by MRT Co.

Last month, it was reported that MRT Co is expected to call for tenders of MRT jobs that comprise 18 elevated civil, station and depot work packages under Phase 1 worth RM15bil. Phase 1 involves 20 km between Maluri and Kajang.

Meanwhile, tenders for Phase 2 of the MRT project will be called in the second half of 2012, which the market values at RM15bil.

“The positive news from MRT Co reinforces our view on the construction sector as we expect a lot of sizeable projects to be awarded this year, especially in the second half of 2012,” says MIDF Research in a report.

An analyst from a local bank-backed brokerage says the new MRT jobs will bode well for the construction industry this year.

“It will create some excitement for the industry and spur spin-off jobs, which will benefit the local construction sector,” he says.

Kwan notes that the Government has targeted a 7% growth for the construction industry this year.

“The kind of growth we hope as envisioned in the 10MP (which covers the period from 2011 to 2015) is to have an annual growth of at least 3.7% per year as compared with 6% per annum gross domestic product growth for the country.”

Kwan believes that the Government’s public-private partnership business model will play an integral role in the development of the local construction industry.

“There is also a need to bring in foreign direct investments (FDIs) which will definitely play an important part to promote construction growth in 2012.

“MBAM opines that boosting investors’ confidence and sentiment with measures aimed at enhancing economic efficiency through market liberalisation and lowering business costs will help add to the country’s FDI growth momentum in 2012,” he adds.

Kwan says the MBAM has urged the Government to speed up the award of new projects, especially those with that would have a high impact to the economy in 2012.

“For projects involving FDI and domestic investors, the timely issue of construction permits will further improve confidence of investors.

“Timely awards and implementation of projects as per the 10MP and ETP from now will contribute positively to construction growth in 2012, as the projects require a gestation period in order to generate impact to the economy.”

Other issues the MBAM feels could present challenges to the local construction industry, says Kwan, include the stability of building material prices, policy and law related matters, aside from high import duties for construction heavy machinery.

The MBAM has suggested the Government reduce the import duty and sales tax for heavy machinery on a systematic basis within two years, until it is reduced to 5% to 10% for import duty and 5% for sales tax, from the 20% and 10% currently. “With the use of new and bigger capacity machinery, productivity will increase and less foreign workers will be employed.”

Kwan says having sufficient and skilled workforce for the sector is also vital. The MBAM has appealed to the Government to lift the temporary suspension for workers’ quota application, saying that the construction industry is currently facing a shortage of manpower.

“The MBAM has written to the Government to allow construction workers above the age of 45 who have been trained as skilled workers to be legalised so as to remain working in Malaysia. This will save both labour cost and reduce the number of new unskilled foreign workers to be brought in.”

Kwan says there is currently a critical need to replenish the pool of skilled construction manpower.

“It is estimated that 35.1% of local construction personnel would reach the age of 50 and above, in seven years from now. Therefore, MBAM is taking steps by collaborating with Open University Malaysia to develop and design industrial based programmes for working adults. The courses developed will incorporate knowledge and entrepreneurship skills which would be industry oriented.”

Kwan says MBAM is also collaborating with the KLIA Professional and Management College and conduct the MBAM Site Safety and Health Supervisors (SSS) training course, which is accredited by the Department of Safety and Health and help address the shortage of SSS in the construction industry.

“The SSS courses are currently conducted in Kuala Lumpur and will be extended to other areas such as Penang, Sabah and Sarawak as per request from the construction industry.”

By The Star

Construction sector to gain more

The kickoff of the country's largest infrastructure project the Klang Valley My Rapid Transit (KVMRT) could spark re-ratings across several sectors starting with the construction sector which is the direct beneficiary.

A flurry of construction jobs which would swell up the order books of companies by leaps and bounds, is expected to be announced over the next six months as the multi-billion MRT development, which is six months behind schedule, strives to play catch up.

To kick-start, MRT Co has appointed IJM Corp Bhd (IJM) and Ahmad Zaki Resources Bhd (AZRB) for the construction of viaduct guideways and other associated works.

MRT Co is the project and asset owner of the MRT.

The two separate multi-million contracts at RM974mil and RM764mil for IJM and AZRB respectively are part of eight complete packages in the elevated civil works portion one of the largest portions of the MRT project.

There are a total of 90 work packages for the entire first MRT line, providing ample jobs for virtually everyone in the consruction industry and including those in building materials and property.

MRT Co chief executive officer Datuk Azhar Abdul Hamid says six more of the eight major packages are expected to be awarded within the next six months.

Of the eight, five will be from the open tender category while three contractors will come from the bumiputra category.

“It should be a fast process as we already have a pre-qualified list,” he says.

While the margins of contractors cannot be predicted, analysts have said that technically, margins for MRT works should be higher than the 5% earned by contractors who worked on the light rail transit or LRT system given the higher complexities and financial risks of the former.

Among those on the pre-qualified list for the elevated civil works portion, analysts have singled out a few companies which are likely beneficiaries based on several factors.

One of this is Naim Engineering Sdn Bhd, a wholly-owned unit of Sarawak's largest property developer and construction firm Naim Holdings Bhd.

Reports point out that Naim's construction and engineering arm has a track record of completing more than RM2.7bil worth of projects either on time or earlier and within budget.

This should augur well for the company since the ability to stick to a strict timeline and within stipulated costs is vital in a mega project like the MRT.

Naim has experience in projects involving road, bridges and buildings for both the Government and private sector.

It is also a pre-qualified candidate in all of the elevated works portion of the project including civil, stations and depot jobs as well as being represented both in the open and bumiputra tender categories.

Besides Naim, AmResearch construction analyst Mak Hoy Ken says for the remaining six elevated civil work packages, he likes IJM, Sunway Holdings Bhd and Malaysian Resources Corp Bhd as possible contenders, for their solid track records in delivering major construction and property projects.

HwangDBS Vickers Research chooses IJM, Sunway, Muhibbah Engineering (M) Bhd and TRC Synergy Bhd as possible recipients, all of which have been pre-qualified for all elevated works including civil, depots and stations.

Azhar says that he does not rule out the possibility of IJM and AZRB being awarded with contracts again despite being the chosen ones in the first round.

“There is a possibility, yes,” he tells StarBizWeek.

On the tunnelling portion - which is the single largest portion of the MRT project valued at about RM8bil, HwangDBS says it is optimistic that the MMC Corp Bhd-Gamuda Bhd joint venture would win the bid despite stiff competition including from foreign parties.

The result of this should be known by April.

“Conventional wisdom suggests it is best to keep this MRT project domestic with a stronger multiplier effect on the economy, especially with possibly slower gross domestic product growth in 2012,” the research house says.

Gamuda is jointly appointed with MMC as the project delivery partner for the entire MRT project.

Additionally, the joint-venture is the only pure local party with bumiputra interest, and therefore would be accorded a 7.5% tender pricing advantage; it also has an edge over its competitors in terms of having better understanding of Malaysia's soil conditions and experience in completing the SMART Tunnel.

As for the initial spillover to other parts of the economy, AmResearch's Mak says the imminent roll-out of MRT jobs is expected to first prod renewed focus on building material players.

“Our initial checks indicate that the Sungai Buloh-Kajang line alone may require 500,000 tonnes of steel, with the maiden orders likely to kick-in by the end of the first half of this year.

“This should benefit Ann Joo Resources Bhd and Lion Industries Corp Bhd, both in steel and Lafarge Malayan Cement,” he says.

The Sungai Buloh-Kajang line is the first line out of three under the entire MRT plan.

According to MRT Co, line two, the circle line (MRT 2) and line three (MRT 3) should be completed by 2020 and are expected to cover the regions of Kuala Lumpur and the north-west corridor of Greater Klang Valley which includes linking Sungai Buloh, Kepong and Selayang with the eastern half of the city centre (including Kampung Baru and the Kuala Lumpur International Financial District).

With such a strong pipeline of multi-million projects just waiting to flow into the order books of the local boys, there remains the huge cloud of political risk with the impending general election. Needless to say, disruptions in political conditions could derail or delay the take-off of any national infrastructure project.

Profit-wise, the earnings impact of the jobs on companies' balance sheets are not expected to be meaningful until at least in two years' time when the project should be in full swing.

Even then, JF Apex Securities Bhd deputy managing director Lim Teck Seng warns that profits gained by companies involved may not be within expectations.

“Swelling order books and actually making money from that are two separate things.

“Most of the jobs will be awarded to companies which offer the lowest price, so if related costs arising from inflationary pressure go up beyond their expectations, the companies may even end up making losses,” he says.

Vincent Khoo, head of research UOB Kay Hian (M) Holdings Sdn Bhd points out that in terms of stock prices, a lot of the good MRT news have already been priced in especially when it comes to the big boys of the sector.

“Hence, valuations may be a little lofty taking into account external uncertainties, upside could be limited but downside significant, if there are delays in dishing out of contracts,” he says.

MRT Co, is expected to make public the list of all the works for the Sungai Buloh-Kajang MRT line very soon with most of the big packages being awarded this year and the smaller ones in the early part of next year.

For now, OSK Research Sdn Bhd is maintaining a “neutral” call on the construction sector.

“We do not discount a potential re-rating on the sector in the near future, pending more concrete signals,” it says.

By The Star

Builders upbeat on 2011 industry outlook

The Master Builders Association Malaysia (MBAM) expects raw material prices for the construction industry to increase this year but still at a manageable level.

Its president, Kwan Foh Kwai said, the association expects the increase to be less than 10 per cent.

If raw material prices increase by more than 10 per cent, than the industry players would look at alternative sources, he told reporters after the signing of a memorandum of understanding (MoU) between MBAM and Open University Malaysia (OUM) today.

"Raw material prices have always beeen subject to market forces. There will be increase (in prices) but within a reasonable percentage," he said.

On the 2011 outlook for the industry, Kwan said the MBAM is optimistic that the year would be good for the industry, backed by the implementation of projects under the 10th Malaysia Plan (10MP) and the Economic Transformation Programme (ETP).

On the MoU, he said both parties would work together to come up with educational and training programmes for the construction industry.

He highlighted that at present, there was a critical need to replenish the pool of skilled construction manpower, as a majority of the workers in it are already ageing.

According to Kwan, it is estimated that 35.1 per cent of local construction personnel would reach the age of 50 and above, seven years from now.

"The OUM programmes are specially developed and designed for working adults. The courses developed will incorporate knowledge and entrepreneurship skills which would be industry oriented," he explained.

Among the programmes are an Executive Diploma in Construction Project Organisation and Control, an Executive Diploma in Construction Management, an Executive Diploma in Project Management, an Executive Diploma in Contract Administration, an Executive Bachelor in Construction Supervisory Management, an Executive Bachelor in Integrated Contruction Project Management and an Executive Bachelor in Contract Management and Administration.

The Vice Chancellor of OUM, Prof Emeritus Tan Sri Anuwar Ali said, the programmes are expected to start next month.

By Bernama

Board expects buoyant building sector as 10MP projects roll out

The Construction Industry Development Board (CIDB) expects the construction sector to be buoyant next year as projects under the 10th Malaysia Plan (10MP) start to roll out from January.

But the government will be cautious in awarding contracts to mitigate the risk of being exposed to a second wave of global economic crises, said CIDB chief executive officer Datuk Hamzah Hasan.

Hamzah said the European debt crises and the slow US economic recovery was worrying and many countries are taking steps to reduce their expenditure in order to improve their budget deficit.

"Malaysia is taking similar steps in view of the expected crises. The impact will be felt in 2011 as what was experienced in 2009," he said.

He, however, said the impact will not be as great as last year due to continuation of projects from the Ninth Malaysia Plan (9MP), new jobs under the 10MP and more public-private partnership (PPP) projects coming up.

Under the 10MP, an amount of RM230 billion has been allocated for development, whereby 60 per cent, or RM138 billion, is for infrastructure.

Hamzah is bullish the industry will replicate this year's expected growth of 3.7 per cent in 2011. To achieve the target, it would need RM80.3 billion new projects next year, up from RM77.4 billion in this year.

He said projects like Matrade Centre, Warisan Merdeka, mass rapid transit and the Malaysian Rubber Board's land development in Sungai Buloh, worth RM70 billion, will contribute to growth next year.

This year, the government has announced projects to the tune of RM72 billion such as the LRT extension, the New LCCT terminal, power plants and luxury housing projects in Iskandar Malaysia.

"These are high-impact projects which will improve the business environment and private investment," he said.

In 2009, when the global economy hit the height of recession, Malaysia's construction sector was able to grow by 5.8 per cent because of completed jobs worth RM309 billion within four years of the 9MP.

"We expect by 2015, the sector will contribute 5 per cent to the country's gross domestic product, from the current 3 per cent," he said.

By Business Times

WCT bags Contractor of The Year Award

The Construction Industry Development Board (CIDB) has presented WCT Bhd with the Contractor of The Year Award during the Malaysian Construction Industry Excellence Awards 2010 (MCIEA 2010) last night.

WCT is a well-known name in the global construction market. Its mega projects abroad include the Abu Dhabi F1 Circuit, the New Doha International Airport, Bahrain City Centre, the Bahrain International F1 Circuit and Platinum Plaza in Ho Chi Minh, Vietnam.

"The group has reached the far shores of development, literally and metaphorically, making it an icon to the Malaysian construction industry," CIDB said in a statement.

The group, along with Sunway Construction Sdn Bhd and ShinEversendai Engineering (M) Sdn Bhd were also presented the International Achievement Award - Special Mention which honours the achievement of Malaysian contractors registered with CIDB for their outstanding and credible recognition in overseas construction venture.

WCT adviser Chua Siow Leng was presented the Prominent Player Award to recognise his more than two decades of contribution towards the betterment of the industry.

CIDB has named property developer Ireka Corp Bhd founder Lai Siew Wah as Chief Executive Officer of the Year.

Putra Perdana Construction Sdn Bhd was also recognised for its Energy Commission diamond building, bringing home the Innovation Award.

By Business Times

Rising building material, labour and hidden costs main concern for Johor developers

JOHOR BARU: Escalating prices of building materials, higher manpower costs due to shortage of labour as well as hidden costs are among the main concerns of property developers in Johor.

KSL Holdings Bhd executive director Ku Hwa Seng said these problems did not just apply to Johor. He believes that developers nationwide also faced similar predicament.

He said the infrastructure projects outlined in the 10th Malaysia Plan (10MP) and Budget 2011 would further push up prices of building materials and labour costs in the next five years.

“The demand for residential properties in Johor, especially in the Johor Baru district, has improved as the economy gets better but developers might have problems kicking off new launches,’’ Ku told StarBiz.


Ku Hwa Seng says infrastructure projects outlined in 10MP and Budget 2011 would further push up prices of building materials and labour costs in the next five years.

He said building materials prices had increased between 10% and 15% in the last 12 months while labour costs had risen by 50%, compared with two or three years ago.

Ku said that shortage of labour was still the main problem for construction companies.

Mahabuilders Bhd group chairman Mustapha Hassan said while the increase in the prices of building materials was relatively stabilised, the same could not be said for the labour costs.

“Like it or not, we still need foreigners to work at project our sites, locals are not interested or else many projects will be delayed not only the ones by the private sector but also by the public sector,’’ he said.

Mahabuilders is among the few in Malaysia specialising in acquiring and reviving abandoned property projects and labeled as a white knight the construction industry.

Among the company’s revived projects to date include Taman Baiduri Johor Baru, Skudai Villa, Indera Wangsa Larkin, Senai industrial park and Pandan City Johor Baru.

By The Star

Are mega projects necessary?

Despite some misgivings from certain quarters, many would view the government's launching of mega projects as an attestation of its commitment towards transforming the economy.

LAST month, the government fired the first salvo by launching seven mega projects under the Economic Transformation Programme (ETP). These projects are part of the 131 entry point projects identified under the government's ambitious roadmap to be carried out over the next 10 years.

Despite some misgivings from certain quarters, many would view the government's launching of mega projects as an attestation of its commitment towards transforming the economy.

Malaysia's economic performance will be affected by many factors including its economic and monetary policies as well as external and domestic demands.

In the past, most Asian countries prospered by adopting explicit industrial policies that focus on building its manufacturing prowess.

Apparently, the contours of the new industrial policy seem quite different today. There are four key policy parameters that the government needs to consider when designing new economic strategies - establishing sound industrial policies that cater to global demands; enhancing its human resource and capital development; adopting aggressive economic policies to strengthen its economic performance; and improvising the nation's physical and social infrastructure.

The goal of the government's economic strategies is simple - create jobs and increase its per capita income by accelerating the economy.

The Asian experience tells us that no country can accelerate its economic growth unless it is willing to invest in major infrastructure projects.

The major allocation to better roads, power supply, transportation and physical infrastructure is part of the government's grand strategy designed to stimulate the economy and restore both the private and public sector's confidence.

The multiplying effect will lead to more jobs being created as a result of the huge investments.

Indeed, investment spending in construction projects have a strong correlation to the rate of economic growth and future prospects.

Economists will agree that demand for construction projects reflects a healthy economy while declining growth implies an economy that is declining.

The construction of tall skyscrapers across many major cities such as South Korea's world tallest twin towers due for completion by 2014, Shanghai with its 121-floor skyscraper, and Mumbai with the 125-storey India Tower and 117-floor World One is a testimony of the importance of the construction sector as a measurement of a vibrant economy.

Since construction is often financed by borrowings that comprise short-term bank credit and long-term bond markets, the aggressive transactions within the capital market will rejuvenate market activities and ultimately lead to opportunities for reforms in the financial system, including improvement of corporate governance, reinforcement of regulatory and supervisory arrangements.

There will also be several visible effects on the economy. The government's active participation in the physical development of the nation directly implies the government's commitment towards improving the country's standard of living. The investments will also stabilise the investment climate while signifying a message of economic vibrancy to foreign investors.

The government has also not lost sight on other factors that contribute to economic growth. Economic growth can only occur when a country has sufficient human capital.

In today's industrial era, accumulation of a nation's wealth is no longer created by machines but human labour, thus the need for the economy to be knowledge-driven.

The knowledge to complement the government's economic agenda combined with the depth of technology embedded in the nation's human capital will decide on the success or failure of the economy. To instil a knowledge-driven economy is no mean feat because it involves major reforms that pervade at every facade of the economy - its social, educational and economic policies.

The ultimate mission is to create a "learning economy" where new technologies are applied and innovation remains the primary goal.

No efforts should be spared to ensure that the country's vision to foster life long learning is rigorously enforced at every level of our society.

The construction sector is seen as the first "battleground" for the government to instil its knowledge-driven economy agenda because of the massive manpower that will be utilised during the projects.

Already more than RM100 billion has been allocated for construction development that comes hand-in-hand with an additional RM1.5 billion on researches and development.

The government has also directly fostered competition among local construction firms by increasing the size of the construction sector while bringing pressure for organisations to innovate because technologies are needed in the wake of fierce competition among local companies.

Firms that aspire to win government-initiated projects will be forced to acquire and utilise advance technological know-how to compete locally, which in turn will mould local firms to be more internationally competitive in addition to generating higher returns and greater growth potential.

Competition will also breed innovation while technological knowledge will spread quickly across many firms to innovate.

In economic terms, the focus on construction development is seen as an attempt by the government to avoid "market mismatch" when supplies cannot fulfil the demand, as the economy becomes more vibrant.

In anticipation of future needs, the onus will be on the government to provide better quality residences to cater to the growing population of city dwellers that is expected to exceed more than 10 million over the next 10 years. There will be more demands for new commercial and retail properties, including better amenities, comprehensive civic facilities and an efficient transportation system.

There is a clear consensus that Malaysia needs an explicit industrial strategy to pursue its economic agenda and the government has identified 12 new key economic areas that need encouragement including the construction sector. The development of the city's physical infrastructure through investments in mega projects has been identified as the first thrust, a process that will revitalise the construction sector, spur the growth of SMEs, offer massive employment opportunities, increase net capital stock, improve labour efficiency and enhance the robustness of the capital market. Are these not enough reasons to justify the need for mega projects?

The writer is an associate professor with the Graduate School of Business, Universiti Sains Malaysia.

By Business Times

Contractors renew appeals for stamp duty waiver

CONTRACTORS have renewed their appeals to the government to waive stamp duties on construction-related contracts.

Two years ago, the government said it wanted to simplify stamp duty assessment by revising the rate on all construction services agreements that do not require collateral to 0.5 per cent of contract value.

This covered consulting contracts, operation and maintenance contracts and facilities services contracts. Therefore, a RM10 million construction contract would attract a total stamp duty of RM50,000.

After appeals from trade bodies the Finance Ministry gave a temporary relief by revising the stamp duty to a flat RM50 fee. But this ends at the end of the year.

"The reversion ... will inflate construction costs," Master Builders Association of Malaysia (MBAM) president Kwan Foh Kwai told reporters after Works Minister Datuk Shaziman Mansor launched the third Malaysian Construction Summit in Kuala Lumpur yesterday.

Eventually, these extra but unnecessary costs will be passed on to the government and the public because all construction contracts are either government jobs or packages awarded by property developers in the private sector.

MBAM also appealed to the government to table the Construction Industry Payment and Adjudication Bill for enactment at Parliament. The draft Bill, which was given to the Attorney General's Chambers in early 2007, has yet to make its way to Parliament.

This proposed new law is meant to minimise payment defaults in the construction industry via timely and cost-efficient recourse to adjudication.

By Business Times

Major projects under Budget 2011 will drive demand for building materials

The slew of construction projects listed in Budget 2011 will drive up demand for buildings materials. —AP

PETALING JAYA: The construction sector emerged as the clear winner from Budget 2011 but a rally in the past months means stocks valuation are no longer cheap and the risk is higher.

The smart money call is on the building material suppliers, from steel makers to cement producers, analysts said.

“We expect more positive news flow in the coming months for the construction sector,” MIDF Research said in a note yesterday, predicting a slew of project roll-outs and tender awards in the coming months.

While the question of who will bag what remained unanswered, analysts said the sheer number of upcoming construction jobs out there would drive up demand for building materials.

Malaysia Iron and Steel Indsutry Federation (MISIF) president Chow Chong Long said there was enough capacity in the country to meet the anticipated increase in demand for construction steel bars and other products.

“We don’t foresee steel shortages if the construction projects listed in Budget 2011 are implemented next year,” he said in a SMS reply to a StarBiz query.

He noted that steel factories in the country were currently running at about half their installed capacity.

“MISIF does not expect steel demand to increase until the middle of next year as it usually takes up to six months for projects to take off from the date they are awarded,” Chow said.

On Friday, Prime Minister Najib Tun Razak announced that a number of multi-billion ringgit projects would start construction next year.

This includes the RM40bil mass rapid transit system in Kuala Lumpur, six highways, the RM26bil KL International Financial District and a plan for an iconic 100-storey tower by Permodalan Nasional Bhd, on top of smaller builds such as rural roads, schools and hospitals.

Most of the big projects were already made known prior to last Friday because they were part of the 10th Malaysia Plan, or the Economic Transformation Programme.

Hence, it was not really a big surprise for the market when the projects were announced in the budget.

“These construction and infrastructure projects would require a lot of steel bars and cement,” BIMB Securities head of research Rosnani Rasul said yesterday.

“We are comfortable to retain our forecast 7% growth in cement demand in 2011,” she added. Among potential beneficiaries are Lafarge Malayan Cement Bhd and YTL Cement Bhd.

Shares in bigger construction groups Gamuda Bhd, IJM Corp Bhd, MMC Corp Bhd and WCT Bhd declined yesterday, largely in sympathy with the FTSE Bursa Malaysia KL Composite Index’s (FBM KLCI) 9.16 points drop yesterday to 1,480.70 points.

The few big gainers yesterday included Ann Joo Resources Bhd, a steel maker rated as a “buy” by AmResearch and BIMB Securities.

“We expect significant gains for the steel sector, which is a cheaper entry for leverage to the Malaysian infrastructure theme,” AmResearch analyst Mak Hoy Ken wrote yesterday.

Mak’s top pick for the steel sector is Ann Joo. The stock yesterday climbed 14 sen, or 4.7%. to RM3.12 – its highest level since January.

Specialisation may help smaller firms stand out from the pack and MIDF Research sees pre-cast concrete manufacturer MTD ACPI Engineering Bhd as a potential beneficiary.

In the budget, the Government forecast its development expenditure would drop 9% to RM49.2bil in 2011, and the slack in spending to be taken up by the private sector.

One of the key aspects of infrastructure development hinges on the success of the implementation of public-private partnership (PPP) projects.

But given the lack of clear details, “much (uncertainty) still lingers on issues like execution of these projects,’’ Inter-Pacific Research head Anthony Dass noted in his report yesterday.

By The Star

Builders warn of costly delays

The government needs to be mindful that for private public partnership (PPP) projects to be successful, approvals must not be delayed.

Indecision and slow approvals, whether by federal or state governments, had many a time caused cost overruns in infrastructure jobs, says Master Builders Association of Malaysia.

"If the government is fully committed to implement infrastructure projects sucessfully under the 10th Malaysia Plan, there has to be an element of accountability in the event of delayed approvals," said MBAM president Datuk Ng Kee Leen.

"Whenever there is a delay in variation order approvals or land acquisition, the costs go up," he said.

"It is not just financing costs. It's also land acquisition costs, building material costs, labour and transportation costs and opportunity costs," he told Business Times in an interview in Petaling Jaya recently.
Government agencies, whether federal or state, need to execute their approvals within scheduled time limits.

"If they fail to do so, they'll need to compensate the bankers who, in turn, are accountable to their account holders and shareholders," he explained.

"This commitment from the government is necessary to boost investor confidence. If not, it will be very difficult for the private sector to pledge tens of billions of ringgit in loans or bond undertakings for infrastructure jobs under a PPP," he said.

Another factor that can help improve implementation of PPP projects is for the enactment of the Construction Industry Payment and Adjudication (CIPA) Bill.

Timely payment is vital for the survival and continuity of contractors and sub-contractors' businesses. Although payments should be made by government agencies or project owners within 30 to 60 days, which is the industry practice, it is often not the case.

Currently, there is no law to mandate security of payment and quick justice via adjudication. Unpaid sub-contractors either suffer in silence or are put out of business, well before they have a chance to seek arbitration or go to court.

"When there is late payment, projects are delayed, squeezing profits along the way. Chronic problems of late and non-payments affect the entire delivery chain of consultants, contractors, building material suppliers, freight forwarders and bankers. A rough calculation will show claims running up to billions of ringgit," he said.

On average, construction jobs run into the millions and span over three years. With each progress payment involving big sums, Ng said the enactment of the CIPA Bill is vital to protect the interests of contractors and sub-contractors.

"This law will help to minimise payment defaults via timely and cost-efficient recourse to adjudication," he said.

"We have been waiting far too long for the CIPA Bill to be made law. We initiated this Bill as early as June 2003. A year later, during a construction industry roundtable chaired by the then Minister of Works Datuk Seri S. Samy Vellu, he lent support to this proposal for Cabinet deliberation," said Ng.

"We, therefore, appeal to the Government to expedite the enactment of CIPA Bill," Ng said.

Similar laws are already in practice in the region. Among them are Australia's Building and Construction Industry Security of Payment Act 2002, New Zealand's Construction Contracts Act 2002 and and Singapore's Building and Construction Industry Security of Payment Act 2004.

By Business Times

Sunway confident of record profit this year

Sunway Holdings Bhd expects a record net profit this year, driven by new business and healthier margins from all its five core divisions, managing director Yau Kok Seng said.



These include construction, property development, trading and manufacturing, quarry and building materials.

The construction division, which has RM3 billion worth of jobs in hand, is bidding for more infrastructure and building projects worth RM16 billion in Malaysia, Abu Dhabi, India and Singapore.

"We hope to get minimum RM1 billion worth of new contracts this year, maintaining our order book at RM3 billion," he told reporters yesterday after a shareholders' meeting in Bandar Sunway, Selangor.

Sunway, controlled by founder Tan Sri Jeffrey Cheah, has prequalified for projects like the light rail transit (LRT) line extension in the Klang Valley, the new low-cost carrier terminal in Sepang and the Kelau dam, part of the Pahang-Selangor raw water transfer project.

Yau said Sunway's property development unit, SunwayMas Sdn Bhd, will launch five projects, including one in Singapore, from July to December this year worth RM600 million.

It has six projects worth RM1.1 billion and 182ha of undeveloped land with potential to generate a gross development value of RM3.3 billion.

"With new construction jobs, property launches and unbilled sales of RM515 million, and increasing trading, manufacturing and quarry activities, we hope to exceed last year's earnings," Yau said.

Sunway reported a strong first quarter net profit of RM40 million, which is 2.5 times higher than in the same quarter last year.

"We have very clear strategy on how we want to build our businesses. The geographic diversification has helped us grow all the divisions.

"To expand further, we will continue to recruit the right talent and manage the foreign exchange rates," he said.

Sunway, which has RM170 million in its reserves, has no immediate plans to do a rights issue, he said.

Yau said Sunway will manage its cash flow, generated from all its operations, to expand.

"We hope to come up with a consistent dividend policy from next year. We are looking to distribute 20 per cent of our profits to shareholders," he said.

By Business Times

MRCB upbeat on winning contracts worth RM250m

MALAYSIAN Resources Corp Bhd (MRCB) hopes to win some RM250 million worth of contracts this year from RM600 million worth of projects it tendered for in Malaysia.

Its chief executive officer Mohamed Razeek Hussain said the bids, for its construction division, are for jobs in the Iskandar region in Johor, Sabah, Kuantan and in Gombak, Kuala Lumpur.

Razeek, who was speaking to reporters following the company's annual general meeting in Kuala Lumpur yesterday, expects a decision on the award within the next three months.

"We have been shortlisted and we stand a good chance (to win) for a hospital project in Sabah," he said, declining to reveal the amount.

On participation in the 1,214ha land project in Sungai Buloh which is being developed by MRCB's controlling shareholder the Employees Provident Fund (EPF) and the government, Razeek said that no tender have been called yet.

Similarly, he said that no tender had been called for the RM7 billion extension of the light rail transit line in the Klang Valley. MRCB Engineering has been prequalified as main contractors for facilities work and subcontractor for fabrication and delivery of segmental box girder.

In the current financial year ending December 31 2010, MRCB expects to cross the RM1 billion revenue mark and make a significant improvement in its profitability this year, as all business segments grow.

In 2009, it made RM921.61 million in revenue and a net profit of RM37.48 million.

Its current construction order book stands at RM3 billion while its prized KL Sentral development project is expected to last until 2016.

"Most of our projects are ending in 2011 and 2012," he said.

One such project where it will enjoy recurring income is the 8.1km RM1 billion Eastern Dispersal Link (EDL) that will link the Sultan Iskandar Customs, Immigration and Quarantine (CIQ) to the PLUS highway. The link will be ready in September 2011 and toll collection will start in 2012.

The Duta-Ulu Kelang Expressway (DUKE) will start to contribute positively in the next three to four years.

By Business Times

Builders see healthy year for construction industry

It would be a healthy year for the construction industry with support expected in the next two quarters from projects awarded under the RM60 billion second stimulus package, Master Builders Association Malaysia (MBAM) said yesterday.

Among projects under the country's stimulus packages include the RM2 billion new low-cost carrier terminal (LCCT) and the RM3 billion LRT extension (two lines) in the Klang Valley.

"These projects will support the construction industry for the next two quarters. After that, we will see how the 10th Malaysia Plan (is working) as the effects will be seen by year end and next year," MBAM president Datuk Ng Kee Leen said.

The construction sector saw a growth of 8.5 per cent in the first quarter of this year.
Ng was speaking to reporters after the launch of MBAM Annual Safety Conference 2010, in Kuala Lumpur yesterday. The event was officiated by Deputy Minister of Human Resources Senator Datuk Maznah Mazlan.

On the expectations of the 10th Malaysia Plan, which is set to be launched on June 10, Ng said it should be positive with many projects planned to be rolled out especially with the government's focus on public private investment.

"These partnerships will work well and the results will be encouraging," he said.

Ng said MBAM also had a dialogue with the Public Private Partnership Unit (3PU) to work out incentives that would encourage local and foreign investments in the construction sector.

The unit, which comes under the Prime Minister's Department, is the core agency responsible for coordinating the privatisation and public-private partnership (PPP) projects, and which can be given injection from the facilitation fund.

Ng said MBAM has also suggested many measures to the government in order to improve the efficiency and sustainability of the construction industry.

Among them are upgrading workers' skills, importing skilled foreign workers, as well as mechanisation of the construction industry by relooking at building new heavy machinery equipment.

"Although there has been some improvements in the import of machineries and equipment, the duty is still high and it is hoped that the Ministry of International Trade and Industry will relook the duty rates," Ng said.

He said it was important to relook the duty rates in order to encourage more players to use new equipment which are efficient, environment-friendly and with better productivity and more safety features.

By Bernama

Loh & Loh expects to do better this year

LOH & Loh Corp Bhd, owned by construction outfit UBG Bhd, hopes to do better in the current financial year ending December 31 2010 in view of new projects in hand.

The major jobs it has secured over the past 18 months are RM142 million worth of infrastructure works in Medini in Johor's Iskandar Malaysia and a RM273 million job in the Seremban-Gemas double-tracking railway project.

"We are a healthy company. We should continue to do well this year. Our property development is building up and we expect higher contribution from the division," its chief executive officer Jason Loh said.

Its new projects are Idaman Hills in Selayang, comprising 38 semi-detached homes and 142 bungalows, and The Peak, a high-end residential project in Bandar Sri Damansara, worth more than RM300 million.
Last year the company posted a net profit of RM27.5 million, 16 per cent more than in 2008.

Loh & Loh was set up in 1965 as a civil construction company by the late P. K. Loh.

The company's first contract was for earthworks for a housing project in Bangsar, Kuala Lumpur, for RM6 million.

The company grew quickly and over the past 45 years has built 15 dams, 48 water treatment plants and over 50 water intakes and pumping stations.

It has also constructed and installed over 250km of large diameter pipelines, and built sewerage plants, river gates, reservoirs, buildings, roads, bridges and golf courses.

By Business Times (by Sharen Kaur)

Malaysia's building sector on the right track

The Construction Industry Development Board (CIDB) is optimistic that the country's construction industry will achieve world-class status by 2015.

Its chief executive officer Datuk Hamzah Hasan said based on the Construction Industry Master Plan 2006-2015, the sector is on track to reach its target.

The growing number of Malaysian companies embarking on projects overseas over the last two decades provides a further boost to this.

Majority of the projects are in the Middle East and North Africa, mainly in Saudi Arabia, the United Arab Emirates, Qatar, Bahrain and Libya.
The Middle East is the largest market where 51 projects worth some RM30 billion are ongoing.

"This is more than India where we have 23 ongoing projects valued around RM7 billion and 22 projects in Asean worth RM5.7 billion. The numbers are increasing," Hamzah told Business Times.

"We have been instilling confidence among our construction players that they are at par with or even better than their counterparts internationally. This has made them more willing to venture overseas.

"The challenge overseas is to maintain the competitive advantage over time. This is because any competitive advantage as a result of cost, better work process and easy access to funds is easily overtaken by the locals," Hamzah said.

Master Builders Association Malaysia president Ng Kee Leen said issues affecting local construction firms overseas are track record and funding.

"There are not many mega projects in Malaysia for the companies to build a track record so they embark on overseas projects in a joint venture with the locals to build their portfolio," Ng said.

"When you have another partner, it is very tough. It will be good if Malaysian firms can bid alone for projects overseas," he added.

Ng said funding was an issue because banks in Malaysia were not willing to support the contractors as they were sceptical about overseas projects.

"We hope Malaysian banks will set up branches in the Middle East and North Africa to support our contractors." he said.

By Business Times (by Sharen Kaur)

Malaysia pushing for more Middle East construction projects

DUBAI: Malaysian contractors are currently working on 51 projects worth US$10bil in the Middle East and are eyeing for more amid a projected upswing in construction demand.

The majority of projects are in United Arab Emirates, Saudi Arabia, Qatar, Bahrain, Oman, Syria, Iran, Jordan and Yemen, the Malaysia External Trade Development Corp (Matrade) said in a statement yesterday. In value terms, the Middle East contributed the highest share of 42% among the 614 overseas projects worth US$24bil in which Malaysian contractors have been involved from 1997 to 2009.


Datuk Noharuddin Nordin ... ‘Malaysian expertise in infrastructure building has been deployed in 73 projects across the Middle East.’

“Malaysian expertise in infrastructure building has been deployed in 73 projects across the Middle East, including landmark initiatives such as Burj Khalifa, Al Reem Island, Dubai Metro, Dubai Mall and Meydan Race Course,” Matrade chief executive officer Datuk Noharuddin Nordin said in the statement.

Construction companies in Malaysia foresee substantially improved demand from the Middle East as infrastructure outlay continued to top national budgets, it said.

Matrade cited a Business Monitor International study forecasting that the global construction industry could grow between 1% and more than 5% up to 2014.

The projected increase was on account of growth expectations in the Middle East, North Africa, China and India.

Matrade said Malaysian construction companies, which already have an international project portfolio of US$15bil, were aiming to lead the revival in key markets.

To seek further inroads in the Middle East, the Malaysian construction sector will attend the third Malaysia Services Exhibition (MSE) 2010 to be held at the Dubai International Convention and Exhibition Centre from April 13 to 15.

“The unique advantages we offer in terms of resources, skills, quality, cost and experience in mega projects give us a competitive edge over leading providers in the United States, Europe and other Asian countries,” Noharuddin said.

Organised by Matrade, MSE 2010 will showcase the world-class capabilities of Malaysian companies specialising in eight service clusters: professional services, oil and gas, construction, information and communications technology, healthcare, franchising, education and specialised training, and financial services.

The three-day exhibition will be attended by 150 establishments including 130 service providers, 12 professional associations and eight government agencies.

A major addition to Malaysia’s construction services portfolio at MSE 2010 will be environmentally friendly architecture and engineering.

By Bernama

Sunway eyes record profits in 2010

MALAYSIAN builder Sunway Holdings expects record profits in fiscal 2010 as the government quickens the roll-out of public sector contracts and as the company’s overseas orderbook swells, said a top executive.

Sunway, ranked seventh among local builders with a market value of US$268 million, will tender for new jobs worth up to RM16 billion (US$4.84 billion) globally with its construction orderbook expected to grow by one-third to RM4 billion this year, said managing director Yau Kok Seng.

“Market conditions have improved over the last six months and we are confident of securing some projects that we have tendered locally,” Yau, a chartered accountant by training, said in an interview today.

Malaysia, home to Asia’s largest budget carrier AirAsia, is planning a new low-cost carrier terminal (LCCT) that will cost RM2 billion to build.
Sunway has submitted its tenders for some of the LCCT jobs and Yau expects the winning bids to be announced as soon as this month.

Sunway shares were up 2.72 per cent at the close of the early trading session today. The stock has risen 16 per cent so far this year, outpacing the construction sector index’s gain of 4.6 per cent.

The earnings forecasts by seven analysts surveyed by Thomson Reuters I/B/E/S put Sunway’s 2010 net profit at RM120.54 million and revenue at RM2.11 billion. Previous year comparisons were not available as Sunway changed its financial year-end to December last year.

By Reuters

Melati Ehsan to bid for 10MP construction jobs

CONSTRUCTION group Melati Ehsan Holdings Bhd plans to bid for government contracts under the 10th Malaysia Plan (10MP) to grow its business.

The 10MP, a five-year economic development plan which runs from 2011 to 2015, is set to be unveiled in June this year.

Melati Ehsan has RM1 billion of contracts in hand, of which more than half are government projects.

These include the construction of the Trans-Eastern Kedah Interland Highway Project and the flood mitigation scheme at Bertam-Kepala Batas in Penang.
The group's net profit fell by a third to RM12.7 million for its financial year ended August 31 2009 due to fewer construction activities and higher raw material prices.

Revenue also dropped to RM178 million against RM208.5 million previously. About 60 per cent of its turnover comes from government projects.

The company is also vying for private development projects, especially from multinational companies. It has completed two Carrefour hypermarkets, one each in Kota Damansara and Cheras.



"Since we have a track record with Carrefour, we are looking forward for more projects with the hypermarket operator in future," managing director Tan Sri Yap Suan Chee said at the group's annual general meeting in Kuala Lumpur yesterday.

It also has 120 acres of land in Kota Damansara and recently acquired land in Bukit Tunku.

It bought 1.6 acre of land in Bukit Tunku for RM16.36 million in August last year and plans to develop bungalow lots next year.

Yap said the company is looking to buy more land in the Klang Valley with about RM80 million cash in hand.

By Business Times