ANNOUNCEMENT pertaining to the resumption of the Mass Rapid Transit Line 3 (MRT3) project has come just in time, like a shot in the arm for the rather muted construction sector where most firms are all dressed up with nowhere to go in recent years.
Considering the sheer size of the MRT3 project, MIDF Research expects contracts to be dished out in packages such as what was seen in MRT2 with project awards split into the underground segment, stations, segmental box girders and viaducts, among others.
“The underground package will most likely be the largest contract and we expect the major early beneficiary to be Gamuda Bhd (“buy”; target price: RM3.63) which would also go on to hold the lion’s share of MRT3,” projected the research house which has upgraded the construction sector to “positive” from “neutral” previously.
The group which is the largest construction company in the country based on market capitalisation is as good as shovel ready for the project premised on its joint venture (JV) outfit MMC-Gamuda with vast experiences in MRT1 and MRT2.”
For the record, Gamuda was recently awarded a RM6.5 bil tunnelling project in Sydney and a RM1.45 bil contract to build a station and two tunnels in Singapore together with its Singapore JV partner.
Another potential front runner in MIDF Research’s view is IJM Corp Bhd which is no stranger to mega projects like this.
“We like IJM due to its strong portfolio of undertaking rail projects such as the excavation of underground tunnels for a portion of Light Rail Transit Line 3 (LRT3) and also the construction of MRT stations and viaducts,” MIDF said in a statement today.
On Friday (March 4), Prime Minister Datuk Seri Ismail Sabri Yaakob announced the approval of the MRT3 or Circle Line which is earlier than market expectations of 2Q CY2022.
Construction of the MRT3 project which boasts a length of about 50km – with a circular alignment running along the perimeter of the Kuala Lumpur city – has been projected to spread over a 10-year period which in MIDF Research’s view is positive for industry players due to the hefty order book replenishment for construction companies.
Going by previous news reports, the research house expects the revised cost of MRT3 to range from between RM27 bil and RM32 bil which is below the speculated RM40 bil to RM50 bil range when the project was scraped in 2018.
“We opine that the final cost for MRT3 may come up higher than MRT2, due to its higher underground portion of 40% as compared to 23.4% of the MRT2 as tunnelling works are more labour intensive, coupled with the high cost of heavy machineries needed such as the tunnel boring machines,” noted MIDF Research.
As a comparison, the underground portion of MRT2 costs RM13.1 bil while its elevated tracks cost RM17.4 bil.
“Using this as a like-for-like comparison, MRT3 could potentially cost RM31.22 bil in our view which is RM19.4 bil for the underground portion and RM11.82 bil based on the cost of RM970.4 mil per km underground and RM393.7 mil per km of elevated track,” opined the research house.
“The cost may potentially be higher for MRT3 than what was previously speculated due to the surge in prices of raw materials.”
Mass Rapid Transit Corporation Sdn Bhd (MRT Corp), the developer of Klang Valley MRT, has previously proposed a hybrid financing model for the project where it may be expected to tap on the private financing initiative (PFI). – March 7, 2022
