Cosntruction Sector - Pan Borneo highway upgrade OVERWEIGHT

- It has been reported that a planned upgrade of the Pan Borneo highway is on the cards. The highway passes through Sematan, Kuching, Miri,  Lawas in Sarawak before cutting through various districts in Sabah including Sindumin, Beaufort, Kimanis, Kota Kinabalu and Tawau. For Sarawak, the 217km is between Sibu and Bintulu and another one running from Bintulu to Miri (207km) would be given priority.

- The estimated cost of the works which connect the East Malaysians states of Sabah and Sarawak is around RM423mil. Of this total, an initial sum of RM100mil would be made available soon and shared equally between the two states.

- These stretches have been given priority due to its high daily usage by commercial and heavy vehicles rushing to Bintulu and other ports within Sarawak’s central region. 

- Works Minister Datuk Seri Shaziman Mansor was reported as saying that the project would only involve upgrading works as opposed to a  dual carriageway, as the current traffic volume is only ~10,000 daily as opposed to ~20,000 vehicles under standard dual carriageway requirements.

- This news supports our earlier conviction of rising job prospects within Sarawak’s SCORE region, where there is an increasingly urgent need for basic infrastructure required to support the state’s growing power requirements – particularly within the Samalaju Industrial Park.

- This follows a series of Power Purchase Agreements (PPA) that state-utility firm Sarawak Energy Bhd (SEB) has inked. The early incumbents include OM Holdings, Asia Mineral Ltd and Press Metal.

- Prior to this, we understand that the Sarawak government has already received a federal allocation to the tune of RM1.1bil – including a RM500mil facilitation fund to kick start the development of a new port at Samalaju.

- We envisage at least four major infrastructure projects that are likely to be rolled out over the next few months:- (i) 600MW Balingian coal-fired power plant (RM2.5bil); (ii) 500kV backbone transmission system (Bunut-Kuching)  [RM3bil]; (iii) balance of works for the Kuching Sewerage project (RM~RM1.7bil); and (iv) New Samalaju port (RM1bil).

- For strategic positioning within Sarawak’s SCORE, we recommend investors to BUY Hock Seng Lee (HSL) and Sarawak Cable for their respective select strengths in marine/civil construction and transmission line-related work. 

- From an end-user standpoint, our pick is Press Metal which is one of the four pioneer investors that have already secured long-term power supply agreements with SEB. Phase 2 of Press Metal’s plant – when completed in  stages by June next year – would triple the group’s capacity to 360,000 tonnes and solidify its solid progression as the largest integrated aluminium producer within ASEAN.     

Source: AmeSecurities