Although Singapore is expecting a slew of upcoming projects and developments, they are likely to be rolled out at a measured pace due to labour constraints, according to a recent report by DBS Vickers Securities.
“With more contracts available, the onus is on construction companies to add to their order books. But competition has been keen and low tender prices are not helping margins in a high labour, material and subcontracting cost environment. More contracts to be won, but timing of contract award and commencement is key,” it said.
With lower project activity, competition will be keener as players have enough capacity to take on additional jobs. However if project activity is high, opportunities will open up for smaller players since more construction companies will be busy with ongoing projects.
“This will also mean higher tender prices and better profitability for both foreign and local contractors. Given labour constraints, we feel that the government will roll out the projects at a measured pace.”
For example, smaller projects like the Jurong Lake Gardens will be completed in phases, starting from 2017.
The report also highlighted the possibility the relocation of the Science Centre will make way for Singapore-Kuala Lumpur (KL) High Speed Rail (HSR) station.
“The Prime Minister, in his National Day Rally speech on Sunday, announced upcoming developments for Jurong Lake District, including plans to merge the Japanese Garden, Chinese Garden and Jurong Lake Park into one attraction and relocating the Science Centre to the Gardens. We believe this could possibly free up the Science Centre’s current site for the Singapore-KL High Speed Rail development,” the report stated.
However, DBS Vickers Securities acknowledge these information forms the preliminary outline for the Singapore-KL HSR development and more concrete development is still subject to negotiations with Malaysia.
Initial listing by Building and Construction Authority (BCA) has the Singapore-KL HSR link’s construction cost reportedly estimated to be at $15.6bn and scheduled for completion by 2019 or 2020.