Lian Beng/ Yongnam/ Low Keng Huat/ CityDev

Construction/ Lian Beng/ Yongnam/ Low Keng Huat/ CityDev: Order book outlook is positive with BCA estimating a construction demand of $26-32b in 2013, but Singapore-based construction companies are surprising cautious amidst concerns on resource availability and rising costs. StanChart notes that sector winners could include companies with access to public sector projects and higher margin businesses with less reliance on labour costs or in-house support capabilities. Delays in completions could keep vacancies lower for longer than expected, which could be positive for residential developers, including City Developments (OUTPERFORM with TP of $$13.60). Ultimately, Construction plays are up 69% year-to-date and trade at 9.8x forward earnings. High-margin construction companies that are less labour intensive may better navigate a highcost environment. Labour costs are a higher component of total cost for main contractors than for specialist services providers. Low free float and trading volumes are key constraints to investing in this sector.