In its research note issued on Friday, it said that based on that estimate for the 350km line, it would cost RM15bil.
The research house said that civil infrastructure could range from RM35bil to RM40bil while the 60 trains could cost RM5bil.
On Thursday, MyHSR Corporation Sdn Bhd (MyHSR Corp) completed its Project Delivery Partner (PDP) tender and has selected two consortia to assist with the project’s civil works.
The Gamuda-MALAYSIAN RESOURCES CORPoration consortium (Gamuda-MRCB) was picked for the northern portion of the alignment.
The Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd-TH Properties Sdn Bhd consortium (YTL-THP) was been selected for the southern portion of the alignment.
The terms of the PDP package agreement shall be agreed upon within three weeks.
UOB Kay Hian Research said the Gamuda-MRCB was awarded the northern portion from Kuala Lumpur to the state border between Melaka and Johor.
The contract will be awarded when MyHSR concludes negotiations with the consortia. Gamuda-MRCB would have a 50:50 interest in the PDP JV.
Construction of the HSR is expected to take five to six years. Assuming the 2026 timeline is intact, contracts for civil construction works should be awarded the latest by 2019.
The respective governments would be financing the project that is within their borders.
“In Malaysia’s case, we think the financing structure would be similar to that for the MRT Line 1 and Line 2, where bonds were raised via DanaInfra Nasional,” it said..
The research house said the official project cost has yet to be formally announced, given the sheer size and long timeframe.
However, media reports suggest that the project could cost around RM60b, which comprises civil infrastructure works of RM35bil and the rest from train sets, operating systems and other associated costs.
Assuming the civil construction works are worth close to RM40bil (with the northern stretch accounting for slightly over half of the value), and PDP fees capped at 6% of construction cost (similar to that for the MRT1, MRT2 and LRT3), the entire project would yield a net profit (at an estimated 5% margin) of RM2.1bil to RM2.4bil.
Assuming a 6.5-year construction period (early-19 to 2025), net profit from project management fees for the entire project would be about RM300mil yearly on a straight line recognition basis.
“The HSR PDP contract could contribute about 8% of Gamuda’s FY20F EPS and 37% of MRCB’s 2020F EPS (we assume civil works package of RM20bil for the 50:50 consortium).
“We would review our forecasts once details of the HSR contract are revealed. Our current forecasts assume RM5b annual contract wins for Gamuda, and only RM1.5bil contract wins for MRCB.
“Physical construction (subcontracting) works could benefit Gabungan AQRS, WCT Holdings, Econpile, Ahmad Zaki, Muhibbah Engineering, Gadang and TSR Capital,” it said.
UOB Kay Hian Research said it preferred beneficiaries of infrastructure spending and companies with good track record in securing jobs and delivering earnings growth.
Its top sector pick is Gamuda (Target: RM6) while property company MRCB (Hold, Target: RM1.10) is a major beneficiary of mega infrastructure contract.
Other buys in the sector include Gabungan AQRS (Target: RM2.47), Kerjaya Prospek (Target: RM1.82) and IJM Corporation (Target: RM3.52).
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