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Following the Middle Eastern oil trail
Potential for infrastructure awards. We visited three Middle Eastern cities (Doha, Abu Dhabi and Dubai) last week, and noted the possibility of a property supply glut still. We believe future spending would likely be concentrated on infrastructure works – roads, LRT lines, rail, power plants and as the Qatar Bahrain Friendship Bridge construction looks likely to commence this year. Malaysian construction players with local infrastructure expertise especially Gamuda and WCT could benefit.
Post the financial crisis. There has been no let-up in construction spending in Abu Dhabi and Doha, with construction activities still in full
swing at both locations. Local channel checks also implied likewise.
Construction activities in Dubai have however slowed considerably, with works having been halted at many project sites and tower cranes idle at many partially completed buildings. Unsurprisingly, Malaysian contractors are unanimously bearish on their prospects in Dubai. IJM, the last of the big boy still in Dubai, will hand over its final project in Dubai, Fortune Executive, this month and shift its focus to Abu Dhabi.
Tender opportunities still available. Abu Dhabi and Doha are the commonly mentioned destinations for tenders among the Malaysian construction companies, which is of no surprise given the sizable amount of spending undertaken by the local government entities. This includes a more than QR30b (~RM30b) LRT and rail system at Qatar, as it embarks on its Vision 2030 programme. Other tender locations mentioned include Oman and
Saudi Arabia. All locations share a common theme – the local governments are flushed with oil revenues.
No major concerns on existing jobs. Middle Eastern jobs now account for a relatively small proportion of the total outstanding order book for Gamuda (7%) and IJM (2%), but a sizeable chunk for Sunway (58%) and WCT (25%). We visited selected project sites – New Doha International Airport in Qatar (Gamuda-WCT), Rihan Heights (Sunway) and Fortune Executive Tower (IJM), both in Abu Dhabi, and saw good progress on the respective projects. For works that were recently completed, there have been no major collection issues.
Maintain Overweight. Malaysian construction companies remain on the lookout for Middle Eastern contracts. Potential awards could yet trigger
another re-rating of the construction stocks. We continue to Overweight the sector in the run-up to the 10th Malaysia Plan and Sarawak state elections. We have Buy ratings for all construction stocks under our coverage.
New Doha International Airport, Doha (Gamuda and WCT)
The New Doha International Airport is situated on a 15 km2 land area. Post completion, the airport will contain the second longest runway in the world. Construction for the CP10 package is managed by a joint venture consisting of Sinohydro (60%), Gamuda (25%) and WCT (15%). Works include two new runways, taxiways, pavements, aprons, traffic tunnels, and drainage. The contract value has been revised upwards from QR1.8b to QR3.36b (due to incorporation of additional works), and there could be scope for further revisions. CP10 is about 83% complete, and is slated for
opening in Dec 11.
Yas Marina F1 Circuit, Abu Dhabi – Completed (WCT)
Construction of the Yas Marina Formula 1 Circuit took a total of 28 months (Jul 07 to Oct 09), including an eight months idling period for redesign works. Construction was done by a joint venture company consisting of Cebarco (50%) and WCT (50%). The contract value was raised from AED 1.3b initially to AED 5b (following the incorporation of additional works). The circuit hosted its maiden race in Nov 09. The project is now under a one-year defect liability period expiring in Oct 10.
Rihan Heights, Abu Dhabi (Sunway Holdings)
Rihan Heights is the first residential phase of the Arzanah development worth a total USD6b. The residential development consists of 854 units in five residential towers, 14 villas and 1,208 car parks. Construction works totaling AED 2.2b (including M&E works) were awarded to a joint venture consisting of Sunway (60%) and Silver Coast (40%), by Mubadala CapitaLand Real Estate LLC, the developer for the entire Arzanah development. Construction is progressing ahead of schedule towards the Apr 11 deadline under a 30-month works period.
Fortune Executive Tower, Dubai – Completed (IJM Corp)
Located in the Jemeira Lake district, construction works for the AED 200m 34-storey office towers were awarded to a joint venture consisting of IJM Corp (70%) and LCL Interiors (30%). Construction was completed in Feb 10, and the joint venture company is due to hand the building over to the client this month.
Potential for infrastructure awards. We visited three Middle Eastern cities (Doha, Abu Dhabi and Dubai) last week, and noted the possibility of a property supply glut still. We believe future spending would likely be concentrated on infrastructure works – roads, LRT lines, rail, power plants and as the Qatar Bahrain Friendship Bridge construction looks likely to commence this year. Malaysian construction players with local infrastructure expertise especially Gamuda and WCT could benefit.Post the financial crisis. There has been no let-up in construction spending in Abu Dhabi and Doha, with construction activities still in full
swing at both locations. Local channel checks also implied likewise.
Construction activities in Dubai have however slowed considerably, with works having been halted at many project sites and tower cranes idle at many partially completed buildings. Unsurprisingly, Malaysian contractors are unanimously bearish on their prospects in Dubai. IJM, the last of the big boy still in Dubai, will hand over its final project in Dubai, Fortune Executive, this month and shift its focus to Abu Dhabi.
Tender opportunities still available. Abu Dhabi and Doha are the commonly mentioned destinations for tenders among the Malaysian construction companies, which is of no surprise given the sizable amount of spending undertaken by the local government entities. This includes a more than QR30b (~RM30b) LRT and rail system at Qatar, as it embarks on its Vision 2030 programme. Other tender locations mentioned include Oman and
Saudi Arabia. All locations share a common theme – the local governments are flushed with oil revenues.No major concerns on existing jobs. Middle Eastern jobs now account for a relatively small proportion of the total outstanding order book for Gamuda (7%) and IJM (2%), but a sizeable chunk for Sunway (58%) and WCT (25%). We visited selected project sites – New Doha International Airport in Qatar (Gamuda-WCT), Rihan Heights (Sunway) and Fortune Executive Tower (IJM), both in Abu Dhabi, and saw good progress on the respective projects. For works that were recently completed, there have been no major collection issues.
Maintain Overweight. Malaysian construction companies remain on the lookout for Middle Eastern contracts. Potential awards could yet trigger
another re-rating of the construction stocks. We continue to Overweight the sector in the run-up to the 10th Malaysia Plan and Sarawak state elections. We have Buy ratings for all construction stocks under our coverage.New Doha International Airport, Doha (Gamuda and WCT)
The New Doha International Airport is situated on a 15 km2 land area. Post completion, the airport will contain the second longest runway in the world. Construction for the CP10 package is managed by a joint venture consisting of Sinohydro (60%), Gamuda (25%) and WCT (15%). Works include two new runways, taxiways, pavements, aprons, traffic tunnels, and drainage. The contract value has been revised upwards from QR1.8b to QR3.36b (due to incorporation of additional works), and there could be scope for further revisions. CP10 is about 83% complete, and is slated for
opening in Dec 11.Yas Marina F1 Circuit, Abu Dhabi – Completed (WCT)
Construction of the Yas Marina Formula 1 Circuit took a total of 28 months (Jul 07 to Oct 09), including an eight months idling period for redesign works. Construction was done by a joint venture company consisting of Cebarco (50%) and WCT (50%). The contract value was raised from AED 1.3b initially to AED 5b (following the incorporation of additional works). The circuit hosted its maiden race in Nov 09. The project is now under a one-year defect liability period expiring in Oct 10.
Rihan Heights, Abu Dhabi (Sunway Holdings)
Rihan Heights is the first residential phase of the Arzanah development worth a total USD6b. The residential development consists of 854 units in five residential towers, 14 villas and 1,208 car parks. Construction works totaling AED 2.2b (including M&E works) were awarded to a joint venture consisting of Sunway (60%) and Silver Coast (40%), by Mubadala CapitaLand Real Estate LLC, the developer for the entire Arzanah development. Construction is progressing ahead of schedule towards the Apr 11 deadline under a 30-month works period.
Fortune Executive Tower, Dubai – Completed (IJM Corp)
Located in the Jemeira Lake district, construction works for the AED 200m 34-storey office towers were awarded to a joint venture consisting of IJM Corp (70%) and LCL Interiors (30%). Construction was completed in Feb 10, and the joint venture company is due to hand the building over to the client this month.
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