A commuter walking past by the enterance of Mutiara Damansara MRT Station at Mutiara Damansara in Kuala Lumpur. - Filepic
KUALA LUMPUR: CIMB Equities Research is maintaining its overweight and Gamuda remains its top sector rail play as it has positioned its bids across all three major tenders.
The research house said on Monday the three tenders are the RM55bn East Coast Rail Link (ECRL), the RM50bn-RM60bn KL-Singapore High-Speed Rail (HSR) and the RM40bn-RM45bn MRT 3.
“A key sector risk is increased tender competition from foreign contractors,” it said.
CIMB Research said a news report about a high-level government meeting on the turnkey contractor for the Klang Valley Mass Rapid Transit Circle Line (MRT 3).
The report cited two of the four bidding consortiums were shortlisted. They are MMC-Gamuda-George Kent (GK) Joint Venture (JV) and the China Communications Construction Co Ltd (CCCC)-China Communications Construction Co (M) Sdn Bhd JV.
The shortlisting process put a heavy emphasis on technical capabilities. While project developer MRT Corp Sdn Bhd previously communicated its desire to seek the most attractive financing package for MRT 3, ultimately financing rate was not the only key criterion.
The report had also stated the lowest financing proposal came from Sapura-Top International Engineering Corp (TIEC) Consortium, at 2.3% per annum.
The CCCC JV had secured financing at a rate of 5% p.a. while the MMC-Gamuda-GK JV offered a rate of 4.7% p.a. The CCCC JV’s financing package had proposed US dollar-denominated debt raised by Chinese banks.
The report stated the government had asked MRT Corp to consider the possibility that the two shortlisted candidates “share the job” as MRT 3’s turnkey contractors.
“Based on our estimates, if the project and funding structure is split by 50:50, this suggests an equal RM22.5bn contract win for both consortiums.
“If this is the case, it remains unclear how much job value will be shared and what are the scopes to be undertaken by each of the Malaysian consortium members,” said CIMB Research.
CIMB Research also has an Add for Malaysian Resources Corp, TP RM1.35, which is 33 sen above the previous close of RM1.02 close.
“While the company is not an MRT 3 contender, we like MRCB for its EDL highway divestment angle and the expansion of its PDP track record on the back of its bid for the HSR package with Gamuda. We deem MRCB as one of the potential beneficiaries of election driven jobs,” it said.
“YTL’s construction arm may experience a bumper year in 2018 as it aims for its RM400m order book to shoot up to RM12bn.
“We believe most of the backlog will come from the Gemas-JB project. More upside could come if it secures any of the three major HSR bids (AssetsCo, PDP, OpCo),” said CIMB Research.
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