Retain Overweight. The Economic Transformation Programme (ETP) 2012 Annual Report (AR) unveiled by PM Najib last night provided an insight into the timing of implementation of two major rail projects – the KV MRT (Klang Valley mass rapid transit) 2 & 3, and KL-Singapore high speed rail (HSR). We think that the first movesrelated to tendering will only happen towards year-end, at the earliest. We are however still Overweight on the sector. Construction is expected to be a post-13th general election (13GE) thematic under our baseline 13GE outcome.
below: Construction & Infrastructure - Peer Valuation Summary (click to enlarge):
Greater KL/KV MRT 1. According to the ETP 2012 AR, significant achievements in 2012 include: (i) completing 94% of land acquisitions, and (ii) awarding all 41 packages of civil engineering works, both for the first, Sg Buloh-Kajang MRT line. Completion of the elevated guideway foundation should reach 72% by year-end, and excavationworks on the seven underground stations should be 50% completed by then too. 10 tunnel boring machines will be delivered to the project site in stages.
Greater KL/KV MRT 2 & 3. Another milestone in 2012 was the completion of feasibility studies for Lines 2 and 3.The next step will be to execute the final Implementation Plan after agreement has been obtained from the relevant stakeholders post the Cabinet decision. We now think the decision (initially expected in 1Q13) will only come after the 13GE – towards mid-2013, at the earliest. On th is basis, we expect the appointment of a project delivery partner (PDP;if any) and the tendering for works in early-2014 at the earliest.
KL-Singapore HSR. The project is under the purview of the Land Public Transport Commission (SPAD), now leading a detailed feasibility study of the proposed HSR track. The study, which will include an economic benefit analysis, a strategic implementation plan and required technical/engineering components, is expected to be completed by Jun 2013. A final decision by the government on the railconnection is expected by end-2013, according to the ETP 2012 AR.
Beneficiaries. The KV MRT 2 & 3 is expected to have a construction value of at least MYR30b, as is the HSR. MMC-Gamuda, by virtue of being the PDP for the KV MRT 1, has a good chance of extending its role, in addition to the tunnel works for Lines 2 & 3. Construction of the HSR may also be undertaken under a PDP concept to better manage cost and completion timelines. Potential beneficiariesinclude Gamuda, IJM Corp, MMC, MRCB, Sunway and WCT among the contractors, as well as those in the building material sub-sector.