Infrastructure builders to benefit from light rail project


Promotional image of the upcoming Penang LRT.

KUALA LUMPUR: The construction sector will continue to be a hive of activity thanks to the Penang light rail transit (LRT) project becoming the next focus.

This follows the government’s March 22 decision to give the nod for the Penang LRT project, with planned completion by 2030.

As the government aims to wrap up negotiations within six months with Gamuda Bhd’s 60%-owned subsidiary SRS Consortium Sdn Bhd to finalise terms, Hong Leong Investment Bank (HLIB) Research’s early estimates is that Segment 1 of the project’s civil works may see contract values of about RM10bil.

“This could grow Gamuda’s unbilled construction orderbook to a mammoth RM30.1bil, once awarded. The award of Segment 1 will bring Gamuda’s decade-long pursuit of the LRT project to a successful close. Gamuda had, through SRS, emerged as an early project proponent directing significant time and resources towards developing the project,” it said.

“Prior to securing federal funding, Gamuda had committed to directing profits from self-funded reclaimed land sales towards the LRT project.

The possibility remains that Gamuda may participate in Segment 2 and the systems and rolling stock package open tenders as well,” the research house added.

Gamuda is HLIB Research’s top big-cap pick with a target price of RM6.11, premised on an attractive valuation and stronger tender positioning for local infrastructure project rollouts.

The research house noted that the stock is attractive, trading at forecast financial year 2025 price earnings multiples of 13.6 times.

Meanwhile, HLIB Research said companies within its coverage that could potentially be strong contenders for the Segment 2 package (which has no indicative value yet), are Sunway Construction Group Bhd, IJM Corp Bhd and Malaysian Resources Corp Bhd, which are all experienced railway contractors.

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Gamuda , LRT , construction

   

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