KUALA LUMPUR – The construction sector is expected to be muted following the cancellation of the Kuala Lumpur-Singapore High-Speed Rail (HSR) project, as well as cost-cutting measures for the Mass Rapid Transit Line 3 (MRT3), said CGS-CIMB.
Sharizan Rosely, an analyst with the investment bank, in a note today said these developments, coupled with the reinstatement of the movement control order (MCO) and proclamation of emergency, have dampened expectations of a recovery in the first half of the year (1H21F).
“Funding and viability aspects aside, the government’s new plan to roll out an alternative (shorter) HSR project that is 30% cheaper than the original RM60 billion cost (excluding rolling stock and systems), and which will start two years earlier (likely in 2022, by our estimates), remains unchanged.
“We also recently gathered that the new MRT3 proposal may see up to a 40% cut in its total original cost of RM45 billion, on the removal of certain underground scopes.
“Our estimated RM63 billion to RM74 billion in combined potential civil works (versus the original estimate of RM105 billion) is a huge catalyst for the job outlook, but our reservations about the MRT3 and new HSR projects lie in the timing risks/uncertainties brought about by the political landscape, which could remain in a state of flux till 2H21F.”
However, CGS-CIMB acknowledged potential “silver linings” in the first half of the year, such as the announcement on the 12th Malaysia Plan, new tenders for water contracts in Selangor, approval of the revised MRT3, new details for the Kuala Lumpur-Johor Baru HSR, and fresh public-private partnership contracts.
Downside risks, said Sharizan, include funding limitations for mega projects, politics, and delays in Budget 2021 projects due to the MCO.
Putrajaya has allocated RM37 billion this year for infrastructure initiatives. – The Vibes, January 18, 2021
