24 December 2008

2009 and the Construction Industry.

Today, my friend, the Master Builders Association Malaysia president Ng Kee Leen spoke to The Star (hence some of the quotes below) and mentioned that it usually took three to six months for tenders to be called after an official announcement. Hence, the next six months are very crucial for contractors - as the contractors would be expecting new jobs to start flowing in.

Last month, the Government announced a RM7bil stimulus package to prevent the economy from contracting amid the global slowdown. Kee Leen told that about RM4bil of the RM7bil was for the construction sector, which often had a spillover effect on other segments. “The new jobs are likely to be small contracts like low-cost housing and schools,” he said, adding that more stimulus packages were anticipated next year. Despite the weaker economic conditions, contractors are still busy with projects that were offered in late 2007 and the beginning of this year. “Contractors are not doing so bad. We may not be making much money but there are still jobs to be done. We hope the RM7bil package will be quickly disseminated to contractors to bid for the projects. This will enable the benefits of the stimulus to be felt and help contractors survive in this tough times,” Ng added.

On the subject of projects, I believe that the government sector's involvement is very critical. This effective rolling out of projects is vital to driving the construction industry in the country. However, the private sector remains a vital partner as we cannot rely on the government alone to provide the work and the projects. I was reading up on Skyscrapercity.com forums yesterday and I noticed there are still going to be many projects to be released in 2009.

This projects are not exactly small projects. For 2009 launch and tenders, we have the country's tallest condominium development, situated at Lot D, KL Sentral to be developed by Capitaland Singapore and MRCB. Sunrise would also be launching their Angkasa Raya redevelopment. Other notable projects in the area include the 41-storey The Peak, which is just a stone's throw from KLCC, UDA's residential development near the Asian Heritage Row, and a host of other projects within KL itself.

Take all this projects, and add in the proposed developments of Plaza Rakyat at Pudu, the new DBKL tower at Jalan Pinang, redevelopment of Plaza Yow Chuan / Empire Tower, perhaps even Menara YTL and maybe even something on the former Bok House site, the coming years are seen as exciting years for the construction industry, although it would be very challenging.

I think as a niche building construction player, Crest Builder stands to gain from all this potential tenders coming up soon. However, with a healthy order book that is able to sustain earnings to FY2010, we would most likely take a more laid-back approach in this tough economic conditions, taking minimal risks in order to safeguard all shareholders' interests and so on.


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