Friday 29 Mar 2024
By
main news image

KUALA LUMPUR (May 18): CIMB IB Research has maintained an “Overweight” call on Malaysia’s construction sector, on the back of the Mass Rapid Transit Line 2 (MRT 2) and Light Rail Transit Line 3 (LRT 3) projects.

It said that the pre-award phase for MRT 2 and LRT 3 looks likely to gain traction in 2H15, with a total estimated cost of RM34 billion. It was also noted that the cost per km of MRT 2 was almost double that of the LRT 3 as 26% of the total length of MRT 2 will be underground versus the LRT 3’s 1%.

Other than that, the project development partner (PDP) award for the LRT 3 is targeted for July 15 (likely 6% PDP fees), while the PDP for MRT 3 has already been awarded to Gamuda – MMC JV.

Awards for LRT 3 could begin from end-15 at the earliest while MRT 2 in 1H16.

The research house stated that 2H15 is likely to be a period of good news flow for both LRT 3 and MRT 2.

The re-alignment of MRT 2 that has resulted in a longer underground portion can be positive for Gamuda as it could mean a larger share of contract value compared to the circa RM4 billion package for MRT 1.

“We expect the pre-qualification and award phase to also feature other contractors under our coverage that have won MRT 1 packages, including IJM Corporation Bhd and Sunway Bhd," it said.

The research house named Gamuda Bhd and Muhibbah Engineering Bhd as its top picks for the sector.

“Accumulate potential MRT 2 and LRT 3 plays ahead of the award phase in 2H15. MRT 2's potential beneficiary list is likely to be broader, similar to the impact of MRT 1, while LRT 3's next key event is the award of the PDP role in July 15.”

Gamuda shares opened this morning with a three sen drop at RM5.18, while Muhibbah’s shares fell five sen to RM2.51 as at 9.28am.

      Print
      Text Size
      Share