Optimistic 2018 outlook for Singapore construction sector

Optimistic 2018 outlook for Singapore construction sector

In the SGX-CGS-CIMB Construction & Infrastructure conference hosted by research house CIMB in April, the majority of the senior management in the construction sector expressed their optimism for the industry in 2018. This positive outlook stems from expectations of higher construction demand in the second half of 2018 – from a series of en-bloc developments and major infrastructure projects, such as the North-South Corridor (NSC), Changi Airport Terminal 5 (T5) and Kuala Lumpur-Singapore High-Speed Rail (KL-SG HSR).

Supporting this view, Singapore’s Building and Construction Authority (BCA) has already released its forecast that the value of construction contracts awarded this year will increase between SGD 26 billion to SGD 31 billion.

Meanwhile, the BCA tender price index reached a low in the second quarter of 2017 and analysts expect it to bottom out in 2018 – keeping construction costs depressed. Nevertheless, some companies reported that competition remains strong in sectors such as geotechnical engineering and other civil engineering works.

In addition, recent statistics from the Singapore Commercial Credit Bureau revealed a marked improvement in payment performance for the first quarter of 2018. If this trend is sustained, the cash cycles of construction companies can be shortened and this will boost their capacity to take on more projects.

CIMB is expressly bullish on specialist civil engineering companies with established track records for their niche expertise, and singled out Yongnam Holdings as its preferred sector pick – alluding to their belief that the firm is a strong contender for projects under the Melbourne Metro, NSC, KL-SG HSR and T5.

The research house also discussed the bright prospects for CSC Holdings, who believes that there will be more contracts issued that require foundation and geotechnical engineering works. CIMB is likewise optimistic on the near-future performance of other construction firms such as Soilbuild Construction Group, TA Corp and Tiong Seng Holdings – not only in Singapore but also in their overseas businesses in countries such as Myanmar and China.

Source: Singapore Business Review

ImageSource: Burst

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