THE BUZZ
Various media sources reported that MRT Corp has officially
confirmed that the MMCGamuda joint venture has won the tunnelling job for the
Klang Valley My Rapid Transit (KV MRT) Sungai Buloh-Kajang (SBK) line with its
bid at RM8.2bn. The decision was made at a One Stop Procurement Committee
meeting chaired by Prime Minister Datuk Seri Mohd Najib Razak in Parliament
yesterday.
OUR TAKE
Surprise, surprise, surprise. Although neither MMC nor Gamuda has made any announcement on Bursa Malaysia
in relation to the said contract, we believe MRT Corp’s announcement is likely to be genuine given
the official statement from the corporation. We deem the
announcement within our expectations, with MMC’s portion working out to be
RM4.1bn given its effective 50% stake in the JV with Gamuda. We are not
surprised that the JV has emerged as the ultimate winner, given its expertise
and experience with the Stormwater Management and Road Tunnel (SMART) project,
the tunnelling works for the Double Track Rail project as well as the Swiss
Challenge condition favouring local contractors over foreign parties.
Details on the
package. The quantum of the said job is at the higher end of our previous
estimate of RM7bn-RM8bn. Works are
expected to start as early as 2Q12, while the target completion date has been
set for June 2017.
Maintain Trading BUY
call. The clinching of this contract by the MMC-Gamuda JV is certainly
within our expectations. The amount of
RM8.2bn came in slightly above our earlier
expectations of M8bn, but this only has the effect of bumping up our SOP fair value on MMC
from RM3.70 to RM3.71. To note that in our SOP calculation, MMC’s Engineering
business (namely the Double Track, the MRT PDP and the MRT tunnelling) comprises
23% of the total SOP value given our high 16x PER multiple ascribed to the sector.
Source: OSK188
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