RM8 Billions Water Project, Who Will Benefit?

From June to September 2009, there will be a numbers of water transfer project which cost RM8 billion.

Three major jobs which form part of the inter-state water project, estimated at RM2.5 billion, will be tendered out from this month.

The construction of the Klau Dam, dual pipelines from the dam to the intake point and a pump station in Semantan to transfer the water along a 45km tunnel which cuts through the Titiwangsa mountain range, will be awarded in the next three months.

There are three more contracts to be tendered out soon… the tender bidding will be from June to September.

What company will benefit from the project?

IJM will build the consortium with Shimizu, Nishimatsu and UEM builders to handle the Pahang – Selangor Interstate Raw Water Transfer. It is including tunnelling work.

Loh & Loh Corp Bhd may be awarded sub-contractor jobs for Klau Dam project in Semantan.

JAKS will bag some of the piping jobs. News reports say JAKS has already been shortlisted with three other players for the piping works.

Gamuda Bhd (and Loh & Loh) should be beneficiaries for the water treatment plant in Selangor where Gamuda will be the main civil contractor for the 1,950-million-litre a day Sungai Selangor Phase 3 water treatment plant (WTP) project — the largest WTP in Malaysia — with Loh & Loh having being involved in civil works for all three previous water supply schemes in Selangor

Watch out the price movement of above mentioned counters i.e IJM, Gamuda, Loh & Loh and JAKS.

- Sabri Jalil

Bright prospects in O&G sector

RISING prices of crude oil have been hogging the limelight as a weaker US dollar spurs investors’ demand for commodity as a hedge against inflation.

Against the backdrop, shares of oil and gas (O&G) firms have also come under the spotlight as stock market punters anticipate that these companies will benefit from more exploration and production (E&P) activities.

Analysts’ observation indicated that prices of crude oil and equities were closely linked. The general trend suggested that stock prices would lead the upward movement of the commodity’s rates. However, equity rates tended to lag the decline in oil prices.

Based on RHB Research’s technical analysis, crude oil prices were likely to increase to the next support range of between US$78 (RM271.44) and US$87 a barrel after piercing the US$60 a barrel support level.

“Nevertheless, based on current crude oil prices, most of the stocks under our coverage are trading at or below the currentcrude oil price level, with the exception of SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd,” wrote RHB.

Based on crude oil rates near US$70 a barrel now, the research firm said shares of O&G firms like Wah Seong Corp Bhd and KNM Group Bhd should, effectively, trade at around RM1.97 and RM1.87 respectively while Petra Perdana Bhd and Dialog Group Bhd should be transacted at some RM3.70 and RM1.26 respectively.

SapuraCrest and Kencana , meanwhile, were deemed fairly valued at RM1.36 and RM1.50 respectively.

“While we recognise the nearer-term risk that contracts would continue to be deferred or re-negotiated, we believe this is mostly discounted by the market.

“We reiterate our view that the continued shortage of offshore E&P assets will underpin the longer-term growth in E&P activity. Hence, we reiterate our overweight stance on the sector,” said RHB. The research entity’s top picks for the sector include Wah Seong, Kencana and KNM.

Meanwhile, OSK Research said as crude oil prices trade near US$70 a barrel, more shallow water and deep water O&G projecs were now feasible against the backdrop of cheaper raw materials such as steel.

“We believe deepwater production cost has fallen to US$40 to US$50 a barrel following the drop in raw material costs, especially steel.

“This has made these projects even more attractive, especially, with oil price on the uptrend coupled with signs of recovery in the global economy, resulting in higher demand for oil and gas, wrote OSK which maintained its overweight recommendation on the sector.

Among O&G companies, OSK’s top picks included Alam Maritim Resources Bhd and Petra Perdana which were given fair values of RM1.95 and RM3.50 respectively. OSK also liked Wah Seong and Kencana which are deemed fairly valued at RM2.58 and RM2.14 respectively.

“We believe these four companies would be the main beneficiaries when new projects come back in a big way”, said OSK which issued buy calls for these companies.

Last year, crude oil prices had surged to a historical high of US$147.27 a barrel in July before tumbling to a low of US$32.40 a barrel in December.

This article appeared in The Edge Financial Daily, June 5, 2009.

Quoted from Theedgedaily.com