CONSTRUCTION

Overweight (No change)

TWO of the four bidding consortiums were shortlisted as the turnkey contractor for the Klang Valley Mass Rapid Transit Circle Line (MRT 3).

According to sources quoted by The Edge Weekly, the shortlisted consortiums were MMC-Gamuda-George Kent (GK) Joint Venture (JV) and the China Communications Construction Co Ltd (CCCC)-China Communications Construction Co (M) Sdn Bhd JV.

The shortlisting process put a heavy emphasis on technical capabilities.

While project developer MRT Corp Sdn Bhd previously communicated its desire to seek the most attractive financing package for MRT 3, one source said that ultimately financing rate was not the only key criterion.

Also, the article highlighted that the lowest financing proposal came from SapuraTop International Engineering Corp (TIEC) Consortium, at 2.3% per annum.

The CCCC JV had secured financing at a rate of 5% per annum while the MMCGamuda-GK JV offered a rate of 4.7% per annum.

The CCCC JV’s financing package had proposed US dollar-denominated debt raised by Chinese banks.

According to the sources, Prime Minister Datuk Seri Najib Tun Razak had asked MRT Corp to consider the possibility that the two shortlisted candidates “share the job” as MRT 3’s turnkey contractors.

One source explained: “The contract value of RM45bil is very big and this is a crucial project, so the Prime Minister doesn’t want it to be delayed or run into problems.”

Based on CIMB Research’s estimates, if the project and funding structure is split by 50:50, this suggests an equal RM22.5bil contract win for both consortiums.

If this is the case, it remains unclear how much job value will be shared and what are the scopes to be undertaken by each of the Malaysian consortium members.

“With this news, we are more upbeat on Gamuda’s outlook for MRT 3.

“We still expect Gamuda to secure the bulk of the underground tunneling and station works.

“(This is so) as it expands its extensive underground construction resources and expertise given its ongoing work on MRT SSP Line (MRT 2).

“At this juncture, it appears that under an ‘equal split’ scenario, any potential boost to Gamuda’s order book will still be sizeable increasing the odds of the group meeting (or even exceeding) its targeted RM6bil to RM8bil potential contract wins this year,” said CIMB Research.