Construction Sector - Dredging opportunities mount at Samalaju Port OVERWEIGHT

- The Star highlighted in a report today that the new Samalaju Port would involve massive dredging and reclamation works worth ~RM194mil as part of plans to expand the port’s facilities. Total capex is estimated at RM1.8bil, including RM300mil for the equipment.

- Based on the project’s approved preliminary environmental impact assessment (EIA) report, some 18.98ha would be reclaimed. This is for the construction of port platform areas as well as other structures that would include wave breakers and berths.

- The significant amount of dredging works required is due to the project being located on a shallow continental shoreline. Hence, there is a need to deepen the approach channel and two turning basin areas within the port basin, outer zone and internal zone.

- We draw comfort that the development of Samalaju Port is fast taking shape, after some earlier drawbacks – as a vital cog to support an expected uptick in logistical requirements when activities within the growing Samalaju Industrial Park located some 60km away from Bintulu town emerge. 

- Just last month, Bintulu Port Holdings awarded the interim port facilities contract worth close to RM200mil to TRC Synergy. The interim facilities comprises a ro-ro ramp and two barge berths of 160m in length each, with a water depth of 7m. The contract is to be divided into two sections (A & B) for completion in nine and 12 months, respectively.

- Section A involves dredging works, construction of breakwater, the ro-ro ramp and a barge berth. As second barge berth would be built under the Section B works programme. These interim facilities would be mainly used by barges to bring in building materials, machinery and equipment for installation at the manufacturing plants within Samalaju Industrial Park, apart from carrying raw materials and other goods.

- From our channel checks, the initial incumbents that would commence operations at the industrial park from 2H12 onwards include:- (i) Press Metal’s aluminium smelter; (ii) two manganese & ferro alloy smelters by OM Holdings & Asia Minerals Ltd; and (iii) Tokuayma of Japan’s polysilicon facilities. 

- For the main construction package at Samalaju Port, we gather home-grown contractors such as Hock Seng Lee (HSL) would be suitably positioned to bid for it. Notably, HSL has a prior track record of developing the RM300mil Tg.Manis deep sea fishing port, supported by its dredging expertise.

- Apart from Samalaju port, we foresee a step-up in job flow visibility in the coming months as the development pace within SCORE heightens. Notably, other major contracts that are on the cards are: (i) 500kv Sarawak backbone transmission line (RM3bil); (ii) Balance of works for the Kuching sewerage system (~RM1.7bil); and Balingian coal-fired plant (RM2.5bil).  

- HSL, Sarawak Cable and Press Metal remain as our top picks for leverage to SCORE. Within this space, we also have BUYs on Naim Holdings, KKB Engineering and B Port.

Source: AmeSecurities