Sarawak-linked stocks tipped to benefit from election-driven development boost

New Straits Times

5 days ago

KUALA LUMPUR: Investor interest in Sarawak-linked stocks could pick up in the coming quarters as the state ramps up infrastructure and clean energy development ahead of its next election, which must be held by April 2027.
CIMB Securities said the state's record-high RM15.8 billion budget for 2025, nearly 70 per cent of which is earmarked for development expenditure, along with its ambitious Post Covid-19 Development Strategy 2030 (PCDS 2030), could act as catalysts for related counters.
"We expect renewed investor interest in Sarawak-linked names ahead of its state election," the brokerage said in a strategy note following a field trip to assess the state's growth prospects and strategic developments.
Key potential beneficiaries include Gamuda Bhd, IJM Corp Bhd, Cahya Mata Sarawak Bhd (CMS), Ibraco Bhd, CCK Consolidated Holdings Bhd and Supreme Consolidated Resources Bhd.
Gamuda is seen as a frontrunner to secure road contracts worth RM1 billion, while IJM is re-establishing its presence through two contracts under the Kuching Urban Transportation System (KUTS).
Ibraco has expanded into water pipe and asphalt production, aligning with Sarawak's RM4 billion water grid upgrade initiative. The company's current order book stands at RM962 million, with ongoing work including the Samarahan bridge and road project, as well as the KUTS Blue Line.
CIMB Securities said the scale of development spending under PCDS 2030 could create meaningful opportunities for listed companies with operations or supply chain exposure in Sarawak.
CMS, one of the oldest listed companies in the state, is the sole integrated cement producer in Sarawak and recently secured a RM550 million contract to build the Borneo Convention Centre II.
The company is also expanding clinker production capacity and holds road maintenance concessions covering 3,300 kilometres of state roads until 2029.
CIMB noted that CMS shares are trading at a 60 per cent discount to book value, with the group backed by a net cash position of nearly RM500 million as at March 31.
In the consumer space, food distributors CCK and Supreme are expected to benefit from rising disposable incomes and population growth.
CCK operates 79 outlets across Sabah and Sarawak, maintains a net cash balance of RM201 million and is targeting three to four new store openings per year.
Supreme is expanding its warehouse capacity in Kuching by 162 per cent and is trading at a 13 per cent discount to its net tangible asset value of RM0.27 per share.
CIMB Securities said companies such as CCK and Supreme are seen as proxies to rising consumer demand in Sarawak, supported by the state's broader economic growth.
Under PCDS 2030, Sarawak aims to become a developed, high-income state by 2030, with a gross domestic product target of RM282 billion, up from RM136 billion in 2019, implying an annual growth rate of around eight per cent.
However, the firm noted that some large-scale projects, such as those involving green hydrogen and floating solar, may offer limited direct participation for listed local players in the near term due to high technical and capital requirements that favour foreign consortiums.
Key risks to the Sarawak investment theme include external economic headwinds, funding constraints, talent shortages and increasing competition from unlisted and foreign contractors.