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The shift of eight projects related to the North-South Expressway into public investment will be a jackpot for the construction industry as the demand for related materials will surge significantly.
Appetite for construction stone is set to witness a dramatic rise since transportation costs might make up for a large proportion in the production cost. Depending on the distance and type of transport, the price of stone delivered to worksites may be double the gate price at the mine.
Previously, the Ministry of Construction had asked 13 provinces where the expressway schemes pass through to create favourable conditions for investors and construction contractors to exploit local raw materials, thereby reducing the time of construction and transport costs.
Experts noted some businesses to watch, including Binh Duong Mineral Construction JSC (KSB), Hoa An JSC (DHA), Bien Hoa Building Materials Production and Construction JSC (VLB), Dong Nai Material and Building Investment JSC (DND), and Construction Investment Corporation 3-2 (C32).
KSB’s two quarries of Bai Giang and Go Truong are conveniently located for supplying stone to expressway projects in the central provinces of Nghe An and Thanh Hoa.
“We believe KSB and DHA are best players in the construction stone sector, as they own many quarries in convenient locations, with large mining capacity and long-time horizons,” noted VNDIRECT analyst Tran Ba Trung.
Besides that, KSB is also aiming to merge with VLB this year – a potential tie-up which could see KSB become Vietnam’s largest stone miner, raising its capacity to 8.8 million tonnes of construction stone annually.
Meanwhile, DHA is among the companies with the highest profit margins in the industry. The company has secured positive profit growth in recent years, with no debt and regular dividend payments for its shareholders.
Stocks from asphalt companies are expected to hold all the cards, since they will become beneficiaries from public investment disbursement. In addition, lower oil prices could translate into higher margins for asphalt companies in 2020.
Market watchdogs recommended to keep an eye on Petrolimex Petrochemical Corporation (JSC), which is the only listed asphalt company and currently accounting for about 30 per cent of the domestic market share of the material.
On the other hand, investors should also pay attention for construction steel stocks.Hoa Phat Corporation (HPG) seems to be the prudent choice, as investors may bet on Dung Quat Steel Complex to be a recipe for success.
Elsewhere, Dong Nai People’s Committee has approved compensation for 3,000 hectares of land to develop Long Thanh International Airport.