Overweight: A feasibility study on the proposed Mass Rapid Transit (MRT) system jointly prepared by MMC Corp Bhd (MMC) and Gamuda Bhd (Gamuda) is expected to be presented to the federal government in three months, according to a newspaper report.
It was earlier reported that the federal government had appointed two independent consultants — Minconsult Sdn Bhd and Andercon Technologies Ltd — to carry out the study.
We understand that the consultants have been hired by the Finance Ministry in consultation with the recently formed Land Public Transport Commission (SPAD). SPAD was formed to coordinate, integrate and regulate all public transport systems in use in the country as well as to come up with a master plan.
The latest development validates our earlier conviction that progress on the MRT proposal is gaining traction. The new MRT system forms part of the federal government’s RM50 billion plan to upgrade and integrate the Klang Valley’s public transportation system.
It was a cornerstone feature during the unveiling of the 10th Malaysia Plan (10MP) in June. Briefly, the project involves construction of 180km to 200km of new lines based on a “wheel and spoke” concept. Roughly 30% of the MRT route will involve underground or tunnel features.
More importantly, we think this project has a good chance of taking off given its associated social and economic benefits. This is also in line with the federal government’s aim to gradually phase out petrol subsidies.
Existing rail facilities within the Klang Valley appear inadequate at 15 million people/km (most major cities in the world average 40 million people/km). The main objective is to improve the share of public transport within greater Kuala Lumpur to 30% in 2015 from 12% in 2009.
From our channel checks, a decision could be known by year-end ahead of the targeted commencement of construction by early-2011.
Including the existing Light Rail Transit (LRT) system works, construction costs are estimated at RM43 billion, of which roughly 30% would be for tunnelling. The MRT system will take up to eight years to complete.
We believe the Gamuda-MMC JV is a strong contender for the tunnelling works package worth RM13 billion, given its prior track record in undertaking the STORM tunnel.
Gamuda is also the sole Malaysian contractor to date to have delivered an MRT system (in Kaoshiung, Taiwan). Based on a 50% share of the tunnelling works and a net margin of 10%, this contract could potentially lift Gamuda’s fair value by 26 sen per share (or 7%) to RM4.08 per share and double its outstanding order book to RM13 billion. — AmResearch, July 9
This article appeared in The Edge Financial Daily, July 12, 2010.
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