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Sri Lanka Equity Forum » Stock Market Talk » Construction Stock's New's

Construction Stock's New's

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1 Construction Stock's New's on Thu Nov 10, 2016 9:31 am

Bullrunner7

Bullrunner7
Manager - Equity Analytics
Manager - Equity Analytics
JBy Uditha Jayasinghe 

Cabinet yesterday approved allocating Section II of the Central Expressway section from Meerigama to Kurunegala to local contractors at a cost of Rs. 137 billion but declined to explain why only one bid was received for each section or to respond to queries of opaque tender procedures.

The cost for the section, spanning 39.29 km, ran into a dispute as bidders sent in contract packages that were 18%-20% higher than the estimate given by the State engineer, the Cabinet paper submitted by Highways and Higher Education Minister Lakshman Kiriella showed. 

However, despite the higher cost the Government did not allow for competitive bidding through open tenders but instead only received one bid for each of the four parts Section II was divided into.  

“The Cabinet Appointed Negotiating Committee after having considered the recommendations of the Procurement Committee and the outcome of the negotiations with the bidders decided to recommend for the approval of the Cabinet that the respective contract packages be awarded to the respective consortium of contractors which has submitted the bid for the relevant package at the corresponding negotiated bid price,” the Cabinet paper noted. 

It also goes on to say that “only one bid was received for each contract package” and therefore an appeal procedure would not be applicable. 

The Government engineers’ initial estimate of Rs. 126.8 billion without VAT was later negotiated up by the Cabinet Appointed Negotiation Committee (CANC) to Rs. 137 billion excluding VAT, which is an 8.05% increase, documents seen by the Daily FT said. Cabinet spokesman Dr. Rajitha Senaratne argued that the revision had to be made as none of the bidders were willing to meet the Government’s estimate. 

“The procurement committee and the CANC had several rounds of discussions to sort out this issue. The private sector has always asked to have access to these large scale projects and they were never allowed under the previous Government. Now we have given them this chance,” he disputed.       

When reporters raised questions about the other sections of the Central Expressway Dr. Senaratne brushed them aside by promising to ask Highways Minister Lakshman Kiriella to attend the Cabinet briefing next week to respond to concerns.  

Local media had earlier reported the Government is in talks with China’s Exim Bank to fund Section I of the Central Expressway, which the contractor, the Metallurgical Construction Company (MCC) of China, has now priced at Rs. 158 billion or Rs. 12 billion more than was originally stated. MCC has been awarded the contract without a tender.

Section I runs 37.1 km from Kadawatha to Mirigama. At the current price, this translates to nearly Rs. 4.3 billion per km. the Government has also run into fresh controversy over its decision to prelist Japanese companies allegedly with the support of the Japanese embassy for the 32.5 km Section III of the Central Expressway from Pothuhera to Galagedara in Kandy.       

Under the latest Cabinet decision the entire length of Section II has been broken into four sections named Package A, B, C and D. Package A (9.71km) has been given to the International Construction Consortium (ICC), Access and a joint venture with Nawaloka and Kdesh for Rs. 34.1 billion. Package B (10.20 km) has been parcelled off to Sierra, Olympus, Tudawe Brothers and Consulting Engineers and Contractors (CEC) for Rs. 34.5 billion. Package C was given to K.D.A Weerasinghe and Co. (KDAW), NEM Construction, and the lesser known E&C at a cost of Rs. 32 billion. 

Package D, despite having the shortest span of 8.5km, was given to MAGA Engineering, CML-MTD Construction, along with V. V. Karunaratne & Co and Hoveal Construction for Rs. 36.2 billion. 

Under this allocation, each kilometre in Package A will cost Rs. 3.52 billion, which is an increase of 8.22% from the initial price estimate. Each kilometre in Package B will cost Rs. 3.39 billion, which is a 7.94% increase and Package C will cost Rs. 2.94 billion per kilometre, a 7.8% increase from the initial estimate given by the State engineers. Package D has the highest cost of Rs. 4.27 billion per kilometre and is a 8.21% increase from the initial forecast. On average, each kilometre of Section II will cost Rs. 3.49 billion. 

The Cabinet spokesman defended the price increases saying they were due to design changes made from the initial drawing done during the tenure of the previous Government. 

The Cabinet paper submitted by Kiriella noted that the “cost of a kilometre is different from package to package due to the additional cost for construction of interchanges, railway overpasses and operational areas and due to different lengths of viaducts.” 

Package A has one interchange and a 2.11 km-long viaduct, Package B two interchanges and a 1.77 km-long viaduct and Package C is a 0.56 km viaduct. Package D will have two interchanges, one railway overpass, one operational area and a 2.35 km-long viaduct.  - See more at: http://www.ft.lk/article/579437/Cabinet-approves-Rs--137-b-Central-Expressway-section-for-local-contractors#sthash.J6WNNJBY.YyXSBnOT.dpuf

2 Re: Construction Stock's New's on Thu Nov 10, 2016 9:34 am

Bullrunner7

Bullrunner7
Manager - Equity Analytics
Manager - Equity Analytics
Good News for Access Engineering! 
Good future ahead !

3 Re: Construction Stock's New's on Thu Nov 10, 2016 9:35 am

Bullrunner7

Bullrunner7
Manager - Equity Analytics
Manager - Equity Analytics
ECONOMYNEXT – Sri Lanka’s construction industry is expected to do well in the next few years given increasing homeownership affordability, big government infrastructure projects and rising demand for high-rises, stock brokers First Capital Equities said.

Growth in the sector slowed down in 2015 after the new government halted some big infrastructure projects, pending reviews of their costs and environmental impact. 

“Infrastructure being one the main driving forces of the construction sector, suffered a hefty blow amidst slowdown in the infrastructure drive during 2015,” the brokers said in a research report on the construction sector. 

But the brokers said they expect “a booming construction sector over next 2-3 years supported by rising affordability for housing, demand for skyscrapers and the government’s mega infrastructure drive.” 

The report said the listed Construction & Building Material Sector on the Colombo bourse is expected to provide 46% average return (annualized 29%) over an 18-month period, well above the expected market return. 

First Capital Equities said middle income affordability will be one of the drivers of construction through the housing market.

“Higher affordability coupled with the prevailing lower interest rate regime and accelerating urbanization has increased demand for housing and apartments, driving the construction sector,” they said.

Skyscraper construction will continue to dominate in the tourism and office space sector.

“With the prevailing high tourist arrival figures converting into new hotels, supplementary establishments and shopping malls, skyscraper construction is expected to continue at a similar pace to the last 5 years,” the report said. 

“The shortage in office space is also likely to add to the future demand for more skyscrapers over the next 5 years.”

The report also said the new government’s USD 40 billion Western Region Megapolis project will provide a huge boost to the overall construction sector.

(COLOMBO, Sept 29, 2016)

4 Re: Construction Stock's New's on Thu Nov 10, 2016 8:09 pm

Bullrunner7

Bullrunner7
Manager - Equity Analytics
Manager - Equity Analytics
75% waiver of PAL for construction sector

5 Re: Construction Stock's New's on Thu Nov 10, 2016 9:06 pm

Brinthan

Brinthan
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@Bullrunner7 wrote:75% waiver of PAL for construction sector
WHAT IS PAL....?

6 Re: Construction Stock's New's on Thu Nov 10, 2016 9:14 pm

Bullrunner7

Bullrunner7
Manager - Equity Analytics
Manager - Equity Analytics
@Brinthan wrote:
@Bullrunner7 wrote:75% waiver of PAL for construction sector
WHAT IS PAL....?
Port and Airport Development Levy

7 Re: Construction Stock's New's on Thu Nov 10, 2016 9:16 pm

Bullrunner7

Bullrunner7
Manager - Equity Analytics
Manager - Equity Analytics
Raw material imported for processing and export is exempted from the payment of PAL. Payment is applicable for all other imports including capital goods. 
Hope this Helps Smile 

8 Re: Construction Stock's New's on Thu Nov 10, 2016 10:26 pm

trader7


Manager - Equity Analytics
Manager - Equity Analytics
AEL (Acess Eng.) and TKYO should do well in the future.

9 Re: Construction Stock's New's on Thu Nov 10, 2016 10:40 pm

Bullrunner7

Bullrunner7
Manager - Equity Analytics
Manager - Equity Analytics
Yes for sure !

10 Re: Construction Stock's New's on Sun Nov 13, 2016 3:11 pm

anges


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
construction and related sectors should flourish in the few years to come ! but will the finance sector benefit indirectly from this ??????????????

11 Re: Construction Stock's New's on Tue Nov 15, 2016 1:23 pm

Bullrunner7

Bullrunner7
Manager - Equity Analytics
Manager - Equity Analytics

12 Re: Construction Stock's New's on Tue Nov 15, 2016 4:54 pm

jayathu


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
As expected ACL n APLA has done well.

APLA Six months EPS 31.50

Annualized EPS 63

PE ratio (Annualized EPS) 3.49times

very much undervalued counter

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