IS the productivity drive a bane to the construction sector? The government has been reiterating its call for companies to boost productivity and be more innovative to attract locals to enter industries that were previously viewed as not Singaporeans' 'first choice' when it comes to their job search.
The construction sector is caught in the above struggle to woo locals to join the sector, as well as to increase productivity.
Construction companies could face rising labour and administrative/marketing costs in its bid to attract locals into the industry, as well as the need to provide for higher expenditure on the purchase of machinery or equipment in order to automate labour- intensive tasks.
An example of how companies in the sector can attract new blood is the offering of scholarships of tertiary education to students studying construction-related courses and tailored career management programmes to the scholarships' recipients when they join those companies.
All these would come at an additional cost to companies. While these measures might push up costs of construction, any increases are likely to be reflected in increases in tender prices when companies tender for their projects.
In addition, to offset the increase in costs, companies may utilise the various productivity schemes in place to automate certain tasks and reduce manpower via the purchase of equipment/machinery.
With the various infrastructure and construction projects coming up such as the North-South Expressway, we maintain our 'overweight' recommendation on the sector. Our top picks within the sector are Lian Beng Group (buy, target price $0.71) and OKP Holdings (buy, target price $0.80).
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