MRCB, Kimlun Corp Among Companies Set To Benefit From Expedited Flood Mitigation Projects

Malaysian Resources Corp Bhd (MRCB) and Kimlun Corp are among companies expected to benefit from expedited flood mitigation projects within the construction sector, RHB research said.

The research firm said the federal government has allocated about RM11.8 billion under Budget 2024 for flood mitigation projects spread across 33 high priority projects.

"A report by the World Bank and Bank Negara Malaysia says that if a flood happens once every 20 years, it could cost Malaysia up to 4.1 per cent of its gross domestic product (GDP) and increase unemployment by 2.2 per cent without adaptation measures.

"With this in mind, we expect the federal government to expedite such projects in the coming months," it said in a note.

RHB research said investable ideas in the flood mitigation space include MRCB which has been shortlisted for a flood mitigation job in Selangor.

It added that this is not a surprise as MRCB is currently involved in the RM380 million Muara Sungai Pahang Phase 3 flood mitigation project. "Aside from this, Kimlun Corp Bhd has expressed its intention to bid for flood mitigation projects which will most likely be in Johor given the group's prominence in the state, in our view. "We also do not discount the possibility of Rohas Tecnic Bhd potentially clinching flood mitigation projects in the near future. "This is premised on its involvement in the RM85 million job constructing pumping stations at two existing retention ponds and laying water pipelines to convey the water to the Semenyih Water Treatment Plant (WTP) intake," it said.

For East Malaysia, RHB research said Naim Holdings Bhd stands out as the main beneficiary for flood mitigation jobs in Sarawak as it was involved Phase 1 (stage 1) of the Kuching flood mitigation project (completed in 2010) for RM149 million. It noted that the Phase 2 of the Kuching flood mitigation project was highlighted as one of the 33 high priority projects under Budget 2024.

The rollout of flood mitigation projects has so far seen Varia Bhd receiving a subcontract worth RM95 million from Kator Construction in Jan to undertake the Klang River flood mitigation project in Section 25, Shah Alam.

Separately, TRC Synergy Bhd secured a RM24 million job in Dec 2023 from the Department of Irrigation and Drainage to design and build a flood mitigation dam in Gombak, Selangor.

RHB research also expects the rollout of flood mitigation projects to provide an additional impetus for the Bursa Malaysia Construction Index to potentially move higher than what was seen in 2017.

This is on top of other big ticket projects such as Mass Rapid Transit (MRT) 3 and Penang Light Rail Transit (LRT)

As such, RHB research has kept an "Overweight" call on the construction sector, with Gamuda Bhd, Kerjaya Prospek Group Bhd and Sunway Construction Group Bhd as its top picks.