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Wednesday May 15, 2013

Gamuda, MMC likely to get RM24.9bil KVMRT 2 tunnelling job

PETALING JAYA: Gamuda Bhd and MMC Corp Bhd are expected to be the frontrunners for the tunnelling works and also be a project delivery partner for the Klang Valley mass rapid transit 2 (KVMRT 2), which is estimated to cost around RM25bil.

The development of the KVMRT 2, slightly longer than the KVMRT 1 connecting Sg Buloh, Serdang and Putrajaya, is expected to be formally announced in July.

Analysts, after a briefing session with Gamuda's top management on Monday, are generally upbeat on the Gamuda-MMC joint venture (JV) being the likely frontrunner to bag the tunnelling works as well as the project delivery partner (PDP) role of the KVMRT 2.

Maybank Investment Bank (Maybank IB) analyst Wong Chew Hann said that the progress of the KVMRT 2 had strengthened its upbeat view of Gamuda, which stood to be the main beneficiary of the project.

“Gamuda believes that MMC-Gamuda JV would bag the tunnelling works expected to be worth around RM8bil and the PDP role, expected to be worth RM1bil, given its project management experience and construction expertise.

“In addition, comments on MMC-Gamuda's performance as a PDP have been positive so far.

“The civil works for KVMRT 2, expected to commence in mid-2015, would replenish Gamuda's order-book post-completion of the KVMRT 1,” he said in a report yesterday.

Wong added that Gamuda was also bidding for the high-speed rail project with a strong foreign partner, whose identity would be announced soon.

Maybank IB has reiterated its “buy” call on Gamuda, raising its target price to RM5.30 from RM4.73.

CIMB Research analyst Sharizan Rosely, meanwhile, said the Cabinet approval for the KVMRT 2 was expected by July 13 and that it would take 1 to two years before works began.

“The KVMRT 2 is now designated as the Sungai Buloh-Serdang-Putrajaya line, spanning 56km, 10% longer than the Sungai Buloh-Kajang or KVMRT 1 line.

“The estimated cost is RM24.9bil or 12% higher than the KVMRT 1 line. Management appears more upbeat on its chances for the KVMRT 2,” he said.

Sharizan said KVMRT 2 would serve densely populated and lower-income neighbourhoods such as Damansara Damai, Kepong, Kampung Pandan, the planned Tun Razak Exchange and Serdang before terminating in Putrajaya.

“From the point of project approval, it would take 1 to two years before work on the KVMRT 2 line can commence.

“This is to allow for the freeing up of capacity for existing KVMRT 1 line contractors, who are likely to tender and make way for other stages such as detailed design, land acquisition, public feedback, prequalification rounds, tenders and awards to take place.

“This staggered project schedule would avoid the overlapping of project works with the KVMRT 1 line and optimise the usage of existing machinery,” he pointed out.

On Gamuda's other prospects, Hong Leong Investment Bank analyst Jarod Soon said the RM1.2bil Langat 2 water treatment plant and RM7bil Gemas-Johor Baru electrified double-tracking project remained good.

“Hence, this would further augment Gamuda's order book,” he said.

On property development, Soon said the company's management was on the lookout to replenish its land-bank and had earmarked to spend about RM1bil a year over the next three years to grow its land-bank around the Klang Valley and Iskandar region.

Gamuda counter ended three sen lower at RM4.70, while MMC shed one sen to close at RM2.81 yesterday.

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