Company View: Gamuda, UEMBLDR and IJM (and the Construction Sector)

Here’s the latest OSK report on the construction sector:

which lists the potential beneficiaries of the 9MP election pump priming which is due to take place this year. The wisdom which is being touted right now on the street is that projects will kickstart earnings and balance sheets of these companies which have been languishing the past few years (with IJM being the best candidate).

Okay I wrote about this back in November so what’s new? Well, I decided to apply my ‘dirty’ test to some of these companies and was a little surprised to see how most of these companies scored with just an average 1 point being scored between the 3 companies.

So beware! Just because the environment becomes more friendly towards a company does not mean that they will be able to translate that into profits. All the stars must align for a stock price to go up and stay up. They are: Good environment, good management and investor interest. Construction companies in Malaysia are benefitting from 2 out of 3 of those factors. In my view, any price action will be driven by investor perception rather than improving fundamentals and hence subject to correction when these stocks fall out of favour.

Just take a look at the IT stocks in the global stage to see what I mean (INTEL, Microsoft, AMD etc. all getting whacked even though the new operating system VISTA has just been launched).

But I will still probably go in on some of these at some point if I see a trend being established (just like I did with IJM last year), but I will only take light positions.

Happy Trading!

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