CGS-CIMB: More clarity needed on larger-value projects in Budget 2023

07/12/2022 12:26 PM

KUALA LUMPUR, Dev 7 (Bernama) -- CGS-CIMB Securities (CGS-CIMB) is hoping for more clarity during the re-tabling of Budget 2023 on the status of large-value projects after the government suspended funds for flood mitigation projects pending a review of direct negotiation contracts. 

The brokerage firm said contractors under its coverage did not have direct tender exposure to the construction packages under the Flood Mitigation Masterplan 2030, however, the news may raise concerns over the status of other larger-value projects mentioned in Budget 2023.

“Our immediate focus would be the status of the RM3.3 billion allocated for MRT3 (Circle Line, RM32 billion total value) under Budget 2023, which is likely to be tabled in the first quarter of next year,” it said in a research note today.

On Tuesday, the Finance Ministry (MoF) has been ordered by the newly appointed Prime Minister, Datuk Seri Anwar Ibrahim to pause the channelling of funds for RM7 billion-worth of flood mitigation projects.

The ministry was also directed to conduct a full review of contracts that have been awarded through direct negotiations for possible procedural breaches. 

CGS-CIMB said this was a negative development for the contract outlook in 2023, but noted that this was not totally unexpected.

“Based on our previous pre-15th General Election scenario analysis, we have raised the possibility that contract suspension/cancellation or review risks may emerge if a new coalition government (as a result of a hung parliament) comes into power.

“What is unclear from the news is the details of the alleged RM7 billion total value of flood mitigation contracts awarded. To our knowledge, since the tabling of Budget 2023 in October this year, the disclosed projects have yet to be awarded,” the brokerage said. 

As such, CGS-CIMB has maintained its neutral stance on the construction sector, with Gamuda Bhd and HSS Engineers Bhd as its preferred picks as MRT 3 plays.

As of 10.45 am, Gamuda and HSS Engineers added one sen each to RM3.93 and 47.5 sen, respectively. 


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