New Land Transport initiatives to benefit Construction Sector. As part of
the government's plans to ease congestion and improve the rail network, a
total of S$50bn is slated to be spent by the government to build new
highways and rail lines over the next 10-12 years, which should help keep
overall demand robust in the construction sector.
New Expressways and Rail lines. Some S$40bn will be spent on doubling
Singapore's rail network to 278km by 2020. Whilst some of this would be
used on trains and related operating systems, the bulk of it should be
spent on infrastructure development. The government has also given the
green light to build a new 21km North-South Expressway to be completed by
2020, estimated to cost S$7-8bn. Add to that the Marina Coastal Expressway,
which costs S$2.5bn, it appears that some S$10bn will be spent on new
expressways alone up to 2020.
Maintain Overweight for Construction sector. We believe that the biggest
beneficiaries of this increase in infrastructure spending would be building
material suppliers like Hong Leong Asia (BUY, TP S$4.30) and Pan United
Corp (BUY, TP S$1.16).
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