Listed construction company Access Engineering is seeing an erosion of revenue due to the unfolding economic crisis. However, a giant in the construction industry with diversified interests, Access has the legs (read, scale) to take it in its stride.

Investment house First Capital said in a recent equities report that the unfolding currency crisis has suspended the construction sector, with most projects halted or running at minimum capacity due to cost escalations and import constraints. ‘Access is also undergoing a tough period with Rs40 billion worth of projects temporarily suspended,’ First Capital said.

According to First Capital, Access had an order book of construction projects worth Rs100 billion, of which donor-funded civil engineering projects totalled Rs15 billion.

However, despite the halt of government-funded road development projects, the government has indicated that they will continue to invest in water projects to improve pipe-bourn water penetration, currently hovering around 36%. Access also enjoys high margins from its water and wastewater management projects. ‘Hence, we expect AEL to bounce back faster than its peers despite the prevailing situation,’ First Capital said.

Access reported a net earnings growth of 76% from a year earlier to Rs1.9 billion in the March 2022 quarter on buoyant apartment sales despite a slowdown in core-construction activities, First Capital contends.

Blue Star Realities, a joint venture luxury residential property development company that Access controls with a 60% stake, made a profit of Rs1.4 billion in the March quarter, up from a loss of Rs8 million a year earlier with 220 residential units sold out of a total inventory of 424 units.

Construction still accounts for half of Access’ total revenue. The company has several ventures here and overseas in large-scale civil engineering, automotive, property and construction equipment and materials. The segment reported a 93% decline in earnings from a year earlier to Rs80 million in the quarter on ballooning net finance costs.

Its construction materials business saw improved margins and revenue. The property segment saw earnings grow 65% from a year ago to Rs516 million in the quarter due to increased rental rates and a marginal improvement in occupancies at Access Towers I & II.