News: Construction sector to benefit from higher gov’t spending

Jun 15, 2017

 

With the government planning to spend an additional S$700 million in public sector infrastructure projects over the next two years, Singapore’s construction industry is expected to fare better this year after struggling from a weaker economy and higher manpower costs in the past few years, reported The New Paper.

The bonanza of infrastructure projects includes upgrading of public amenities like sports facilities and community clubs.

In January, the Building and Construction Authority (BCA) forecasted that the overall value of construction contracts to be awarded would range from S$28 billion to S$35 billion compared to last year’s preliminary projection of S$26.1 billion.

“The projected stronger construction demand is due to an anticipated increase in public sector construction demand from about S$15.8 billion last year to between S$20 billion and S$24 billion this year.”

“The public sector is expected to contribute about 70 percent of the total construction demand, boosted by an increase in demand for most building types and civil engineering works,” it said.

However, demand for construction works from the private sector is expected to remain soft in 2017 and would likely hover between S$8 billion and S$11 billion.

Nevertheless, the stronger construction demand from the public sector would benefit the 10 biggest construction and engineering firms listed on the Singapore Exchange (SGX).

According to a report from SGX in May, the 10 largest Singapore-listed construction players achieved an average return of 27 percent year-to-date versus the nine percent gain of their counterparts in Asia Pacific.

Notably, the former only recorded a 16.6 percent increase on their five-year average annualised return compared to the 20.1 percent growth posted by the latter group.

In particular, two of the best performing construction companies on SGX are Lian Beng and Hock Lian Seng Holdings, which respectively posted a gain of 34 percent and 59.7 percent so far this year.

These firms are primarily involved in public sector projects and are considered by the BCA as A1 grade contractors, meaning they can take part in tenders for government projects of any size.

For instance, Lian Beng revealed in March that it won the job to redevelop a Housing Board industrial complex at Defu for S$435 million — its largest construction contract ever.

Meanwhile, Hock Lian Seng announced last month that it won the right to develop a 4,890 sq m site at Tampines Industrial drive for S$3.708 million. Last year, it teamed up with Sembcorp to carry out S$1.12 billion worth of development works for three runways at Changi Airport.

 

This article was edited by Denise Djong.

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Gary Lau
Executive Group Division Director
ERA REALTY NETWORK PTE LTD
garylau@singnet.com.sg
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