Boston, MA -- (ReleaseWire) -- 05/01/2014 -- As expected, activity in Malaysia's construction and infrastructure sectors cooled to a more sustainable level in 2013 and we expect a slowdown in growth to continue in 2014. This is because we expect demand for residential and non-residential buildings to fall in 2014, while fiscal concerns will continue to present financing risks for public-funded projects, particularly in the infrastructure sector.
Having said that, the government has been successful in attracting foreign and private sector parties to implement and finance its investment plans, and we believe this success will be a positive tailwind for construction activity.
Key Developments That Will Impact Growth
- In December 2013, Malaysian builder Ekovest announced its whole subsidiary Konsortium Lebuhraya Utara-Timur (Kesturi) secured a MYR1.18bn (US$370mn) contract to be the master contractor for phase two of the 18km Duta-Ulu Kelang Expressway (DUKE) in Kuala Lumpur. The project is expected to be completed at end-2016. Kesturi is the concession holder of the DUKE. The concession agreement started on August 11 2005 and ends in August 2039.
- In December 2013, the board of Amcorp Properties accepted, in principle, an offer by Gamuda to acquire the company's 20% equity stake in highway toll operator Kesas Holdings. Gamuda already owns 30% of Kesas, with the other shareholders of Kesas being the Selangor state government (30% stake), Amcorp Properties (20%) and state-run investment fund Permodalan Nasional (20%). Kesas is the toll concessionaire for the 35km Shah Alam Expressway under a concession agreement that is valid until August 18 2023. As of February 2014, Gamuda's offer to fully acquire Kesas Holdings has failed, with the Selangor state government and Permodalan Nasional rejecting Gamuda's offer to acquire their stakes in the toll-road operator.
- There are several plans to boost road connectivity to the Kuala Lumpur International Airport (KLIA) in Sepang. In December 2013, UEM Group, which owns a 51% stake in toll concessionaire PLUS Malaysia, submitted a plan to the government to build the Paroi-Senawang-KLIA-Salak Tinggi (SKLIA) highway. The construction cost of the highway is estimated at MYR2.2bn, excluding land acquisitions that could increase the project cost by another MYR500mn. Besides the SKLIA highway, the concessionaire of the KL-Putrajaya highway, Maju Expressway, was conducting a study to construct an 18km extension between its Putrajaya interchange and the KLIA. The construction cost for this extension is estimated to be about MYR1bn.
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