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Tuesday, November 15, 2011

Construction - Penang Paves Way For Major Road Jobs (OSK)

The Edge Financial Daily reported today that the Penang government has proposed to implement four road projects totalling RM5-8bn in the state to ease traffic congestion. The proposed roads are Gurney Drive-Jelutong Expressway (4.2km), Jelutong Expressway-Bandar Baru Air Itam bypass (4.6km), Penang-Butterworth undersea tunnel (6.5km) and Jalan Tanjung Bungah-Teluk Bahang paired road (12km).

Potential beneficiaries. At this juncture, we think it is still hard to pinpoint the construction beneficiaries, but we believe most of the awards in Penang will be based on “knowhow” rather than “know who”, given the state’s philosophy of Competency, Accountability and Transparency (CAT). As such, contractors with a good track record in domestic open tenders such as WCT (BUY, FV: RM2.93) are prime candidates. IJM (NEUTRAL, FV: RM5.26) also stands to benefit as developments in Penang would have a positive impact on prices of the company’s The Light property development. It also has a strong track record in Penang, having completed the Jelutong Expressway, Butterworth Outer Ring Road, Jln Masjid Negeri Flyover and Sg Perai reclamation. Currently, the group is undertaking the access road job to the second Penang Bridge (RM350m). Another potential winner is land reclamation specialist Benalec Holdings (NR), as some of the developments in the island are likely to require reclamation works.

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