KUALA LUMPUR: CIMB Equities Research is retaining its Overweight on the construction sector and it had Gamuda as its top pick with the Mass Rapid Transit 2 (MRT 2) now in focus.
It said on Monday that it has come to understand that that MRT Circle Line (MRT 3) could be tabled for Cabinet approval likely in the first half of 2018.
“This would underscore the rail theme. We reiterate our Overweight stance, with Gamuda as our top pick for the rail theme. Sector downside risks are project delays and funding risks,” it said.
To recap, CIMB Research hosted an MRT ride and site tour of phase two of MRT SBK line, which was led by officials from MRT Corp (MRT asset owner) and Prasarana (rail operator).
It said the four-hour trip was attended by 22 fund managers and buy side analysts, as well as four officials from MRT Corp and Prasarana.
MRT Sungai Buloh-Kajang Line (MRT 1) phase 2 was launched on July 17 and represents the final 30km stretch (including the 9.5km underground portion) of the entire 51km alignment. In total, there are 31 stations along the MRT system.
With the completion of the MRT 1 Line, MRT operations have been fully handed over to Rapid Rail Sdn Bhd, a unit of Prasarana.
For MRT Corp, which is the asset owner, the focus now shifts to the MRT Sungai Buloh-Serdang-Putrajaya (MRT 2), which has completed the award phase and is now under construction.
“As at end-June, physical completion is below 10% and should pick up in 2H17.
“Also, the first tunnel drive will commence in November 2017, where six out of the 12 tunnel boring machines (TBMs) are ready to be deployed,” it said.
CIMB Research also stated that RM2bil savings for the construction of MRT SBK line (MRT 1), which brought the cost down to RM21bil, did not include the savings from land acquisition cost which was fully borne by the government.
The land acquisition cost was reduced from the allocated RM3bil to RM1.5bil.
For MRT 2, the main area that will be affected will be the Ampang Park area, where there are 252 strata owners. The estimated land acquisition cost is unknown as discussions are still ongoing.
“In terms of revenue model, Prasarana will benefit largely from the fare revenue (ticket sales) while MRT Corp will recognise non-fare revenue (i.e. mainly advertising, telecommunications infra and rental of retail space at the stations).
“For non-fare revenue, advertising is the main component. Recall that recently, Titanium Compass Sdn Bhd, secured the train concession advertising. Another major advertiser is Media Prima via Big Tree Outdoor Sdn Bhd,” it said.
Limited time offer:
Just RM5 per month.
