PETALING JAYA: Several construction stocks on Bursa Malaysia surged as uncertainties surrounding the billion ringgit light rail transit 3 (LRT3) project eased.
Shares in George Kent (Malaysia) Bhd (GKent) hit limit-up, the maximum allowed rise for a day as the counter went up more than 30% or 30 sen to RM1.29 apiece.
Other construction counters that soared yesterday included Malaysian Resources Corp Bhd (MRCB) and HSS Engineering Bhd, which shot up above 30% during intra-day trade to close at 69 sen and 74 sen a share, respectively.
It is worth noting that both GKent and MRCB were appointed the project delivery partner (PDP) for the LRT3 by Prasarana Malaysia Bhd in 2015.
The excitement in GKent and MRCB shares came after lunchtime yesterday, after the Ministry of Finance (MoF) issued a statement in the morning that the Cabinet had approved the continuation of the LRT3 project.
The cost to proceed with the 37km rail line has been fixed at RM16.63bil.
According to Finance Minister Lim Guan Eng, the cost would include all project costs, including but not limited to work package contracts, land acquisition, project management, consultancy fees, operational and overhead costs, as well as interest during construction.
“The LRT3 project is a critical project meant to alleviate the issue of traffic congestion along one of the most important and densely populated economic development corridors in the Klang Valley, from Klang to Petaling Jaya,” he said.
Lim said a thorough renegotiation and rationalisation exercise of the LRT3 project was undertaken with all key stakeholders including Prasarana, MRCB-GKent joint venture (MRCB-GK JV) and Land Public Transportation Commission (SPAD).
In addition, he said the construction of the LRT 3 project will be restructured from a PDP model to a “fixed price contract” with MRCB-GK JV.
“This will ensure that the price will be fixed and will not be subject to cost overruns. The details of this contract will be disclosed at a later stage,” Lim said.
Among the changes in the scope of job of the LRT 3 that would reduce the cost include shelving the construction of five stations with low projected ridership, downsizing of the design for the remaining 21 stations and extending the completion timeline by four years from 2020 to 2024.
AmInvestment Bank said the downsizing the stations will hit all main contractors involved in the LRT3 project.
It said WCT and TRC Synergy Bhd, which are the main contractors for the Johan Setia LRT train depot in Klang “would be hurt” by the downsizing of the design for the depot.
“On the other hand, IJM is likely to see the contract value for the underground section being revised down from RM1.1bil currently, in line with the change in design from an underground to an aboveground one,” it said in a report yesterday.
AmInvest said WCT and Gabungan AQRS will be negatively affected by the shelving of several stations.