THE 11th Malaysia Plan (11MP) 2016-2020 tabled last Thursday by Prime Minister Najib Razak sets the final course toward Vision 2020, but so far it has not injected any enthusiasm on the local bourse.

The benchmark FBM KLCI slipped to an intra-day low of 1,793.34 points last Thursday — a two-month low — before closing below the psychological 1,800 point mark at 1,795.04 points (down 0.83% or 15.07 points). The local bellwether ended the week lower at 1.787.50 points.

That said, for stocks on Bursa Malaysia, infrastructure development seems to be the key theme that will have a spillover effect, especially for construction counters.

“The construction sector seems poised to be the main beneficiary of the 11MP, with the higher development expenditure allocation for the next five years of RM260 billion versus the RM230 billion allocated in the 10MP,” Eastspring Investments Bhd’s head of research Lilian See tells The Edge.

About half of the allocation has been pegged for infrastructure development (see table for key projects). Another 30% will go towards social matters like education and healthcare, while the remaining will be spent on safety and general administration.

The following are top picks of fund managers and analysts based on the 11MP sectoral themes.

Gamuda Bhd

If analysts are clear about one thing, it is that Gamuda Bhd is a clear beneficiary of the Klang Valley Mass Rapid Transit (MRT) Line 2 as it is the project delivery partner (PDP), alongside joint venture partner MMC Corp Bhd.

They say Gamuda is a frontrunner for the tunnelling works worth RM10 billion, owing to its solid track record with MRT Line 1, which is slated for completion in July 2022.

“The RM8 billion Gemas-JB rail double-tracking and RM25 billion MRT Line 2 are positives for Gamuda as the group is likely to be the main winner given its track record in completing the RM12 billion Ipoh-Padang Besar double-tracking project and the RM23 billion MRT Line 1. What is unclear for now is the revised timeline and funding for the Gemas-JB rail job,” says CIMB Research’s Sharizan Rosely.

Gamuda-MMC has also bid to be the PDP at Light Rapid Transit (LRT) Line 3, which should be awarded this July.

CIMB Research has an “add” call on Gamuda with a target price of RM6.20, a 22.5% upside from last Friday’s closing price of RM5.06.

IJM Corp Bhd

IJM Corp is considered a frontrunner for major infrastructure jobs under the 11MP. It is the potential winner of the RM25 billion MRT Line 2 (above-ground packages) and RM9 billion LRT Line 3 projects, among others. IJM Corp is a top pick for Etiqa Insurance & Takaful’s head of research Chris Eng.

“IJM Corp would be the largest beneficiary of the West Coast Expressway. It has been appointed to undertake RM2.8 billion of the works, with the remaining RM2.2 billion to be tendered out,” says HLIB Research’s Jeremy Goh.

He recommends a “buy” on IJM Corp with a target price of RM7.92, indicating an 11.5% upside from last Friday’s close of RM7.10.

Cahya Mata Sarawak Bhd

Cahya Mata Sarawak (CMS) is expected to be a beneficiary of the 11MP development expenditure allocated for the East Malaysian infrastructure sector, in particular the Pan-Borneo Highway, says UOB KayHian Research analyst Vincent Khoo.

The conglomerate is well-placed to bag such jobs based on its track record in the state, where it has multiple maintenance concessions for federal roads (some 680km) and state roads (5,400km).

“CMS is in a strong position to secure some packages [from the RM27 billion Pan Borneo Highway project] and will boost its building-material products [division] as well,” says MIDF Research’s head of equity research Syed Muhammed Kifni.

CMS, which deals primarily in cement, construction materials and road maintenance, has in recent times also been a favoured proxy to the Sarawak Corridor of Renewable Energy, and its road concessions bring in steady income streams.

Note that some 40% of the company’s equity is held by the family of former Sarawak chief minister Tun Abdul Taib Mahmud.

UOB KayHian has a “buy” call on the stock at a target price of RM5.37, indicating a 0.75% upside from Friday’s closing price of RM5.33.

Hock Seng Lee Bhd

Analysts concur that another potential beneficiary of the Pan Borneo Highway is Hock Seng Lee (HSL). “While not exclusively mentioned, we expect some jobs to come out from the Sarawak portion of the RM27 billion Pan Borneo Highway; home-grown Hock Seng Lee is a potential beneficiary,” says AmResearch analyst Mak Hoy Ken.

Hong Leong Investment Bank Research (HLIB Research) analyst Jeremy Goh says that the Sarawak-based contractor has a decent chance of participating in the project.

HSL had a clean balance sheet with no debts and RM85 million in cash as at end-March.

Note that the group secured RM105 million worth of new projects in the first quarter and could be the choice contractor for the remaining phases of the Kuching central sewerage system worth RM3.5 billion, having already completed the first phase of RM452 million.

Its order book stands at RM1.5 billion in hand, with RM870 million outstanding.

AmResearch has a “buy” call on the stock with a fair value of RM2.30, indicating a 17.9% upside from last Friday’s close of RM1.95.

Sasbadi Holdings Bhd

Most of the 11MP education initiatives did not run far from that already highlighted in the Malaysian Education Blueprint 2015-2025. The government will continue to reinforce STEM (Science, Technology, Engineering and Mathematics) Education through enquiry-based and hands-on learning opportunities.

“We believe the potential beneficiary of the [11MP] measures above would be Sasbadi,” says HLIB Research Mardhiah Omar.

Sasbadi is well-poised as it is setting up its first learning centre in Kota Damansara, which will emphasise on STEM Education. The centre is expected to open in the second half of 2015.

“Also, Sasbadi’s existing online platform is in accordance with government initiatives aimed specifically at promoting the use of online educational resources to complement conventional classroom teaching,” she says.

HLIB Research has a “buy” call on the stock with a target price of RM2.72, indicating a 26.5% upside from last Friday’s closing price of RM2.15.

Note: The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Visit www.theedgemarkets.com for more details on a company’s financial dashboard.

This article first appeared in Capital, The Edge Malaysia Weekly, on May 25 - 31, 2015.

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