CABINET’S green light to proceed with the Mass Rapid Transit Line 3 (MRT 3) project shall be music to the ears of the construction fraternity given there is at least RM22.5 bil in project value to be doled out.
Maybank IB Research said it remains to be seen whether the project will be undertaken via the project delivery partner (PDP) or turnkey contractor model although the current environment favours the former amid a low interest rate backdrop and urgency for major infrastructure works to commence to drive economic recovery.
“Based on their experience in both MRT 1 and MRT 2, MMC Corp Bhd-Gamuda Bhd (in partnership) are strong contenders to lead under the PDP or turnkey model,” opined head of research Wong Chew Hann in a sector update.
“They are also the lead contender for the tunnel works worth at least RM10 bil, we estimate.”
The Mass Rapid Transit Corp Sdn Bhd (MRT Corp), the project owner and developer, is expected to provide updates on the studies done in 2018 before the project was suspended with a view to kickstart works in 2H 2021.
To re-cap, the MRT 3 or Circle line was planned in 2015 to provide a loop link to integrate the Klang Valley public transportation system. At a length of circa 40km, its earlier project value was RM45 bil based on the fact that 70-80% of its alignment being underground.
However, the project was suspended in 2018 after a change in Government due to its cost factor. In 2019, the Government and MMC-Gamuda were reported to be in talks to revive the project at a much lower value of e.RM22.5 bil (or half its original value).
This assumed a scale-down of the underground alignment length (and fewer stations) with 70-75% of its track alignment to be above-ground.
Maintaining its “overweight” outlook on the sector, Maybank IB Research expects MMC-Gamuda to be the lead contender for the tunnel works with major players like IJM Corp Bhd and Sunway Construction Group Bhd to win the above-ground and station works.
Meanwhile, CGS-CIMB Research reiterated its “neutral” stance on the sector with political uncertainties and clarity on mega project funding being upside risks.
“Cabinet’s approval lifts the overhang on the MRT 3 project but the speed of implementation, in our view, hinges on the finalisation of funding structure beyond the RM15 bil direct allocation for new public transport projects under Budget 2021,” reckoned analyst Sharizan Rosely.
“Whether the new MRT 3 comes with a private finance initiative (PFI) given the Government’s limited room for a direct infra funding model remains to be seen.”
Aside from funding and political uncertainties, the research house is net positive that construction newsflow on new mega contracts could pick up in 2H CY2021.
“Overall, this is good news for rail contractors; we reiterate our “add” calls on Gamuda, IJM, Malaysian Resources Corp Bhd (MRCB) and WCT Holdings Bhd as potential MRT 3 winners,” added CGS-CIMB Research. – April 5, 2021
