‘Contractors, building material firms to get hit’

KUALA LUMPUR: The rail contract downturn has been set in motion after two mega projects worth about RM100 billion were scrapped by the government, said CIMB Investment Bank Bhd.

The effects would be felt by contractors and building material providers, it said in a report.

The government has scrapped the Mass Rapid Transit Line 3 and Kuala Lumpur-Singapore high-speed rail (HSR) projects, estimated to cost RM50 billion each, to control the country’s debt.

CIMB said the hardest-hit would be those carrying out rail-related jobs, such as Gamuda Bhd, MMC Corp Bhd and George Kent (M) Bhd.

It would also affect rail job outlook for WCT Holdings Bhd, Malaysian Resources Corp Bhd, Sunway Construction Group Bhd and Gabungan AQRS Bhd.

CIMB said Lafarge Malaysia Bhd would be affected, too, as the projects’ cancellation dashed any hope of a surge in infrastructure jobs to absorb the overproduction of cement.

Kimlun Corp Bhd, a producer of tunnel-lining segments and segmental box girders, will similarly not be spared.

CIMB warned that the RM8.9 billion Gemas-Johor Baru electrified double-tracking and the East Coast Rail Link (ECRL) jobs could be at risk of being terminated.

“We believe any upcoming big-ticket rail projects are now at risk of deferment, renegotiation or outright cancellation.

“These include the Gemas-Johor Baru electrified doubletracking project and ECRL,” said CIMB, which remained “underweight” on the sector.

Fitch Group unit BMI Research reportedly said Malaysia’s construction industry would only grow at an average of 4.3 per cent a year until 2022 without the HSR and ECRL projects.

Axing the two projects, which it said had a total investment value of US$40 billion (RM158.8 billion), would also hurt property and industrial developments along the rail routes.

“This will also exacerbate the already-negative impact (Prime Minister) Tun Dr Mahathir Mohamad’s surprise victory in the general election has had on foreign investment,” BMI Research was quoted by the Malay Mail as saying yesterday.

However, the firm said the construction sector was quite resilient and would be able to bounce back due to the government’s priority on public infrastructure as per its election manifesto, even if the scale of projects would be smaller and focused on transport and utility projects that address quality of life and cost of living issues.

We believe any upcoming big-ticket rail projects are now at risk of deferment, renegotiation or outright cancellation. CIMB INVESTMENT BANK BHD