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Maintain overweight: The Edge weekly’s article on the KL-Singapore high-speed rail (HSR) highlighted several key points: 1) Land Public Transport Commission (Spad) chief executive officer Mohd Nur Ismail Kamal wants to make sure the HSR project is not just good but great. 2) The RM40 billion price tag may still be on the low side, considering the RM57 billion cost of the 345km Taipei-Kaohsiung HSR. 3) Other ways for the government to cover the cost of construction include advertising, and development of land along the alignment, which can make up 30% to 40% of operating revenue. 4) The Chinese, Koreans, and Europeans are keen to participate and fund the HSR. 5) A concession model for the HSR needs to be carefully carved out to not run the risks of losses like the Taiwan HSR Corp. 6) The KL-Singapore HSR is called the Southern Corridor HSR.

We are positive on the details in the article as it shows that the KL-Singapore HSR, despite the lack of details in the 11th Malaysia Plan, remains clearly on the government’s to do list. It is not surprising that crucial details such as cost, project structure, financing structure and the roles to be played by Malaysia and Singapore have not been fully ironed out as the bilateral agreement was signed recently. 

However, what is clear is that the HSR has attracted international players, both on civil expertise (including rolling stock) and funding options. This does not mean that local players, especially YTL Corp Bhd, have lost their advantage. 

We continue to believe that a private sector model remains advantageous to YTL’s tender position given its huge cash pile and being the first to propose the private sector model. 

We expect that more details of the HSR’s timeline will be provided during the tabling of Budget 2016. — CIMB Research, June 15.

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This article first appeared in The Edge Financial Daily, on June 16, 2015.

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