Election outcome brings relief to investors, businesses — Analysts

KUCHING: The retention of Barisan National (BN)’s majority win in the polls should boost the state’s economy.

According to analysts, the continuation of policies would bring relief to both investors and businesses, while home-based companies stand to gain from the ‘politics of developmentalism’.

Hong Leong Investment Bank Bhd (HLIB Research), in a special report on Sarawak politics, observed that a party’s control over state finances had been an essential ingredient in winning support in the polls.

It argued that in the months running up to the elections and during the campaign period, promises for funding, especially for infrastructure projects such as roads, had increased — a phenomenon that had been termed as the ‘politics of developmentalism’.

“Most notably, the Budget 2016 tabled in October last year contained many measures targeted at Sarawak,” HLIB Research outlined in the report. “Budget 2016 saw a specific section that was dedicated towards intensifying development in Sabah and Sarawak with seven key measures.”

These measures included the implementation of the RM29-billion Pan Borneo Highway project, exemption of Goods and Services Tax (GST) for rural air services (RAS) routes, interest-free loans for construction of longhouses, RM70 million in fertiliser subsidies for hill paddy farmers, RM260 million for price uniformity programmes, RM115 million for special programme for Bumiputeras, and 1Malaysia Mobile Clinics in the state’s interior areas.

HLIB Research said apart from these directly-mentioned measures, other nationwide initiatives likely to benefit Sarawak would be those deemed as ‘rural development-centric’ such as the upgrading of 700km of roads worth RM1.4 billion and provision of rural electrification and water supply programmes worth RM878 million.

“The grouse that Sarawak’s development has lagged behind its peninsula counterpart has always been an issue brought up during elections,” HLIB Research added, noting that within Sarawak itself, development tended to be centred along the coastlines, while the inland areas remained ‘rural’ with minimal or improper road connectivity.

“A survey by the Merdeka Centre highlights that Sarawakians consider ‘jobs creation’ and ‘improvement of public infrastructure in rural areas’ as the respective second and third most important issues requiring attention from the state government.

“Judging from the demands of voters, we have identified two main pillars of development that we expect the government would push for Sarawak.

They are the industrialisation of Sarawak’s economy via SCORE (Sarawak Corridor of Renewable Energy), which would lead to more jobs creation; and the implementation of the Pan Borneo Highway which would form the backbone of its transport connectivity.”

Sarawak counters gain on election wave

On this point, several Sarawak-based companies saw gains on Bursa Malaysia leading up to elections as investors placed their bets on well-connected counters, which would stand to gain from these boosts.

One fine example is cement conglomerate Cahya Mata Sarawak Bhd (CMS) which rose nine sen, or 2.32 per cent, to close at RM3.97 per share on Friday — riding on a trading volume of 5.9 million shares.

“We highlight CMS as a potential Sarawak election play as it stands to benefit from the Pan Borneo Highway project via the supply of aggregates, as well as its joint venture (JV) with Bina Puri Holdings Bhd securing construction works,” HLIB Research said.

“It is also a direct beneficiary of Sarawak’s development, given its monopoly of cement in the state.”

Meanwhile, Sarawak Cable Bhd (Sarawak Cable) — a key beneficiary of Sarawak’s generation capacity ramp-up — also saw fresh gains on Friday. To note, Sarawak Energy Bhd is expected to roll out between RM500 million and RM600 million worth of 500KV transmission line projects this year, from which Sarawak Cable would likely gain.

“Sarawak Cable’s ability to secure close to RM1 billion worth of transmission line jobs since fiscal year 2013 (FY13) validates our view that it is in a polar position to participate, once these projects are rolled out. This argument is even more concrete after taking into account that Sarawak Energy is the second largest shareholder of Sarawak Cable.”

The stock rose five sen, or 3.5 per cent, to close at RM1.49 per share on Friday — seeing more than 2.8 million of its shares traded.

On the property side, investors did not miss out on the chance to accumulate property-related stocks such as Naim Holdings Bhd (Naim), which rose 10 sen or 4.5 per cent to close at RM2.30 per share on Friday, with nearly 510,000 shares traded.

Naim is one of the state’s top property developers with an orderbook of about RM1 billion as at March 1 this year, and is currently focused on its three flagship developments — each in Kuching, Miri and Bintulu.

The group, through its JV agreement with Gamuda Bhd, is touted to be the frontrunner for one of the Pan Borneo Highway project packages.

Hock Seng Lee Bhd (HSL) also stands out as one of the top contenders to secure one of the Pan Borneo Highway packages. Given the swampy terrain of Sarawak, HLIB Research believed that HSL would be able to leverage on its marine engineering expertise to execute the job.

The stock gained two sen or 1.11 per cent to RM1.82 per share on Friday, with 2.15 million shares exchanging hands.

Meanwhile, the researchers at AmInvestment Bank Bhd regarded KKB Engineering Bhd (KKB) as one of their top picks, based on its dominant position in Sarawak’s steel fabrication industry.

“We continue to expect its associate, Oceanmight Sdn Bhd, to win jobs in the fabrication of oil and gas structures. We understand that it is also one of the local parties pursuing opportunities in the Pan Borneo Highway (project). This is positive, given the lack of jobs in its conventional activities in steel engineering activities,” the team from AmInvestment said.

KKB closed at RM1.63 — a rise of one sen, or 0.62 per cent— as at Friday, with 209,600 shares traded.

Other counters that stood to gain in non-construction related companies, AmInvestment said, would be timber players such as Jaya Tiasa Holdings Bhd and Ta Ann Holdings Bhd.

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