7 LRT job packages worth RM3b up for grabs
IJM, Muhibbah and MRCB among those likely to secure 7 more packages worth RM3b, say analysts
THERE are seven more major civil works packages worth around RM3 billion for the Light Rail Transit 3 (LRT3) up for grab with IJM Corp Bhd, Muhibbah Engineering (M) Bhd and Malaysian Resources Corp Bhd (MRCB) seen as among the frontrunners, say analysts.
This followed the awards of a combined RM3.96 billion of contracts to Sunway Construction Group Bhd (SunCon), Gabungan AQRS Bhd and WCT Holdings Bhd on Thursday.
Analysts also said investors had started bargain-hunting for these companies’ shares, resulting in relatively brisk trading volume in the stock market.
Price movements of the stocks had been trending upwards for the past three days, they added.
CIMB Research said Gamuda Bhd remained a contender for the 2km LRT3 underground package although the developer might not be a frontrunner given the potential change in specifications and alignment.
It said year-to-date, Prasarana Malaysia Bhd had awarded seven packages comprising various work scopes that include depots, stations and light rail vehicles.
“Within our coverage, potential beneficiaries of the remaining LRT3 packages could be IJM Corp and Muhibbah Engineering.
“Companies that have so far secured LRT3 contracts are Mudajaya Group Bhd, WCT Holdings Bhd, the CRRC-Tegap Dinamik joint-venture and TRC Synergy Bhd. Going by the list, SunCon, Gabungan AQRS and WCT are the first three beneficiaries of the above-ground and station packages, and the biggest winners by contract value,” it said.
Affin Hwang Asset Management portfolio manager David Loh is positive on the news-flow front for the construction sector and expects valuations to become more expensive in the future.
“We anticipate more from LRT3 as its project delivery partner has only awarded half of the packages so far,” he told NST Business.
Job wins would inevitably boost order book but whether they would translate to earnings depends on each company’s execution capability, he added.
MIDF Research head Redza Rahman said it is possible that others contractors would get a piece of the pie with those with good track record such as MRCB being at the front line of the queue to minimise the impact of cost overrun and delays.
The recently-awarded contracts for LRT3 have some of the winner companies’ earnings estimates upgraded.
For example, SunCon bagging the largest award portion worth RM2.18 billion was a positive surprise to Hong Leong Investment Bank (HLIB).
As a result, HLIB upgraded the company to a “buy” with a higher target price of RM2.59.
Affin Hwang Invesment Bank has also uplifted the target share prices of WCT and Gabungan AQRS to RM2.44 and RM1.95, respectively.