Top Story : Sarawak Focus – Settling the SCORE
Market Update
Sarawak is due to hold its state elections at the latest by May 2011, although indications are that polls could be held this year. The constant news flow will likely be the catalyst for local companies there.
We maintain our view that SCORE is the most attractive of the five economic corridors launched by former PM Tun Abdullah Ahmad Badawi given the significant potential for cheap energy which is being used to attract energy-intensive industries. This will have knock-on effects on the construction, building materials and housing sectors.
The immediate focus will likely be on Sarawak’s natural resources including palm oil, timber and oil & gas, although construction stocks like HSL will clearly be an early beneficiary from the infrastructure projects.
Other key considerations are the FDI that will be attracted especially in the energy-based industries, as well as the Sarawak state election itself.
As it stands, the Sarawak-based companies like HSL, Naim, CMS and Weida have already outperformed the FBM KLCI for the YTD, and in our view will continue to be supported by positive news flow. Among the Sarawak stocks that we cover, we believe HSL will likely be a prime beneficiary of more construction contracts. The timber players are less tied into domestic projects but nevertheless could potentially be involved in other downstream activities. We believe the plantation companies may also be beneficiaries if the state government opens up more land for oil palm plantations.
RHB Equity 360° (Market, Steel, Cement, Insurance; Technical: Mulpha, UEM Land) - 29/03/2010
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