KUALA LUMPUR – Maybank Investment Bank Bhd (Maybank IB) has maintained its positive stance on the construction sector after the government had given the green light for the Klang Valley Mass Rapid Transit (KVMRT) Line 3.
Spanning about 40km, KVMRT Line 3 was planned in 2015 to provide a loop link to integrate the Klang Valley public transportation system, said Maybank IB.
It was initially projected to cost about RM45 billion with 70% to 80% of its alignment being underground, but construction was suspended in 2018 following a change in the government due to the cost factor.
In 2019, the research house said the government and MMC-Gamuda were reported to be in talks to revive the project at a much lower value of about RM22.5 billion, or half of its original value.
This is based on the assumed scale-down of the underground alignment length and fewer stations, with 70% to 75% of its track alignment to be above-ground, it said.
Maybank IB said it expected that construction groups involved in the KVMRT2 above-ground and/or station works would be similar to those involved in the KVMRT3 above-ground and station works.
“We expect MMC-Gamuda to be the lead contender for the tunnel works, and major players like IJM and Sunway Construction to win the above-ground and station works,” it said, naming Gamuda and IJM as its two top “buys”.
Meanwhile, CGS-CIMB Securities Sdn Bhd (CGS-CIMB) maintained its neutral stance on the construction sector, with diminishing political uncertainty and clarity on mega-project funding as upside risks.
It said that although the cabinet’s approval lifted the overhang on the KVMRT3 project, the speed of implementation hinges on the finalisation of funding structure beyond the RM15 billion direct allocation for new public transport projects under Budget 2021.
“Whether the new KVMRT3 comes with a private finance initiative – given the government’s limited room for a direct infra funding model – remains to be seen.
“Funding and political uncertainties aside, we are net positive on this news as construction news flow on new mega contracts could pick up in the second half of this year,” it noted.
Overall, CGS-CIMB believes that the KVMRT 3 was good news for rail contractors, and so has reiterated its “add” calls on Gamuda, IJM Corp, MRCB, and WCT as potential KVMRT3 winners, with Gamuda as its top play for the revived project.
At 11.46am, Gamuda rose eight sen to RM3.66 with 2.6 million shares traded, while IJM Corp gained six sen to RM1.26 with 320,400 shares traded. – Bernama, April 5, 2021
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