CIMB Research retains overweight on Gamuda for play on HSR theme

These train lines include the Thailand-China Railway in Thailand and the Kuala Lumpur-Singapore High Speed Rail (HSR) connecting Malaysia and Singapore.

KUALA LUMPUR: CIMB Equities Research is maintaining its Overweight on Gamuda for a play on the KL-Singapore high-speed rail (HSR) theme in 2017.

It said on Wednesday a legally binding bilateral agreement for the much anticipated HSR was signed the previous day and marked another big milestone for this mammoth rail project.

The earlier estimate for the HSR was RM30bil to RM40bil and a recent news report put it at RM60bil to RM65bil.

While it still remains premature to work out the size of contracts that will spill over to local contractors, this theme remains relevant to domestic rail players in its coverage such as Gamuda, IJM Corp and WCT. 

The length of the entire 350km HSR alignment remains unchanged. According to details from Channel News Asia, of the entire rail system,15km will lie in Singapore and 335km in Malaysia (96% of total alignment). 

Other new details include that the HSR lines in Singapore and Malaysia are to be linked by a bridge over the Straits of Johor 25 metres above the water level. This new breakdown should provide a rough hint of how the development cost will be apportioned.

The project time frame set forth under the bilateral agreement continues to put 2026 as the targeted completion date, suggesting an unchanged eight-year construction time frame, assuming that the project (the building phase) starts in 2018. 

According to Bernama news, the bilateral agreement also formalised the financing and procurement aspects
of the project to a certain extent, but no further details were disclosed.

CIMB Research pointed out that a Joint Development Partner (JDP) would be appointed in early 2017 to assist in the overall implementation of the HSR project is on track. 

“We understand that the JDP will provide advice on operational, technical and procurement matters relating to the high speed railway systems and operations. 

“We still believe that the JDP is likely to be a reputable international HSR expert. It appears the JDP will also assist on the structure and monitoring of the civil works tender, which could begin in late 2017.

“Joint tender for the HSR system will commence in 4Q17 and a decision on who to award the rail system to will be made by end-2018. On this note, it remains to be seen if the 4Q17 timeline will also cover the civil works tender. 

“Apart from a joint tender for cross-border HSR operations, Malaysia will also put up its own tender for a domestic operator to run the domestic service within its borders,” it said.