ONLY two companies — Gamuda Bhd and a Chinese entity linked to The Export-Import Bank of China (China Exim Bank), which is a wholly-owned subsidiary of the Chinese government — are understood to be vying now for the role of project delivery partner (PDP) in the development of the RM27 billion Penang Transport Master Plan (TMP).
While the name of the Chinese party is unclear, three other outfits — China Railway Construction Corp, China Harbour Engineering Co Ltd and Sino Hydro Corp Ltd — had acquired the request for proposal (RFP) documents from the state.
It is understood that up until recently, IJM Corp Bhd was also in the running but the company has since fallen off the radar screen, much like other companies that were initially in the mix, including WCT Holdings Bhd, Scomi Group and MMC Corp Bhd, to name but a few.
“While there are only two companies left — Gamuda (fundamental: 2.20; valuation: 1.10) and the company linked to China Exim Bank — the former seems to be the front runner to bag the PDP job for the TMP,” says a source.
The Edge understands that though the RFP was initiated last August, it was extended and closed only about three months ago.
Some of the key tenets of the TMP include a 17.5km light rail transit (LRT) line linking Komtar to the Penang International Airport (previously known as the Bayan Lepas International Airport) and a connection from Bayan Lepas to Tanjong Bungah that cuts through mountainous terrain.
While it is not clear what consideration the PDP will get in return for the RM27 billion price tag, news reports have it that the winner could reclaim up to 1,500 acres located strategically between the Penang Bridge and Sungai Pinang, which is often referred to as the Middle Bank that is home to the second largest seagrass patch in the peninsula.
Gamuda’s appeal, it seems, lies in its experience as the PDP for the mass rapid transit (MRT) 1 and 2 jobs in partnership with MMC Corp, the RM12.5 billion electrified double track project from Ipoh to Padang Besar, also partnering MMC, and the KMRT Orange Line in Taiwan, partnering local company New Asia Development Corp, and its sound balance sheet.
For the six months ended Jan 31, 2015, Gamuda posted a net profit of RM368 million on revenue of RM1.2 billion, which translates into an earnings per share of 15.8 sen. Its cash and bank balances amounted to almost RM1.2 billion and its investment securities some RM465.8 million. Long-term debt and short-term borrowings stood at RM2.8 billion and RM731.8 million respectively.
The PDP job for Penang’s TMP could be worth as much as RM5.5 billion. This should shore up Gamuda’s order book, which, as at March 31, 2015, stood at RM1.6 billion. Nevertheless, as much as RM5 billion from underground work for MRT 2 should strengthen the order book as well.
Penangites are hopeful that the TMP will create growth in the state’s economy, which largely depends on the manufacturing sector, especially electrical and electronics. The latter accounts for about 60% of the manufacturing business in Penang. Other sectors that are important include healthcare and life sciences, tourism, education and aerospace.
While the Penang economy is resilient, it has been held back by a lack of transport infrastructure and a dearth of quality land for industrial expansion. In the Penang Forum and Property Summit held in January, it was clearly stated that the TMP, which is slated to be a 50-year, transformative development plan, will be a catalyst for economic growth.
Other than better mobility for people and goods, the TMP is likely to include parks, waterfront features and open spaces, among others, to improve the quality of life for Penangites.
The framework for the TMP was prepared by Halcrow Consultants Sdn Bhd, Singapore Cruise Centre Pte Ltd and AJC Planning at a cost of RM3.2 million three years ago and hinged on highway enhancement, policy changes and public transport to improve traffic conditions in the state.
Another aspect of the TMP is that the PDP will handle all the regulatory requirements of the federal government, such as a licence to construct the rail or LRT lines.
Gamuda is not known to have any issues with the federal government, other than being in a prolonged water consolidation exercise involving both Selangor and the federal government; Gamuda has refused to part with its 40% unit Syarikat Pengeluar Air Sungai Selangor Holdings Bhd for the RM250.6 million offered, suggesting instead that the water treatment plant be valued at RM2.8 billion.
Last Thursday, the stock closed at RM5.02, giving it a market capitalisation of just over RM12 billion.
This article first appeared in The Edge Malaysia Weekly, on June 22 - 28, 2015.
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