Construction Sector - Three more MRT awards worth RM732mil out Overweight

- MRT Co has announced on its website that it has awarded three additional contracts under the Sg.Buloh-Kajang (SBK) project worth a total of RM732mil. 

- The scope of works is for the construction of elevated stations and other associated works at certain sections of the MRT line.

-  Package S2 (RM205mil): Taman Industry Sg.Buloh, PJU 5 and Dataran Sunway. The award went to Naim Engineering Sdn Bhd, a unit of Naim Holdings. 

-  Package S3 (RM276mil): The Curve, One Utama and Taman Tun Dr. Ismail. UEM Construction clinched this contract.

-  Package S8 (RM256mil): Apex Communication Sdn Bhd clinched this job that involves works along the Saujana Impian, Bandar Kajang and Kajang corridor.

- Interestingly, all three contractors are repeat winners of other packages of the SBK MRT project. Naim and privately-held Apex were successful bidders for package S2 (Seksyen 16, Pusat Bandar Damansara & Semantan) and S7 (Balakong and Taman Koperasi).

- Meanwhile, UEM had earlier been awarded the viaduct works (package V8) along the stretch between Taman Mesra and Kajang. We make no changes to our earnings forecasts and BUY call on Naim, as this latest contract win already forms part of our existing order book forecast.

- With these latest awards, a total of 48 out of the 85 tenders under the SBK MRT project have been dished out.

- More importantly, we reckon that all of the major components for elevated civil works (including stations) under the MRT line have now been awarded. Another 10 are at the tendering stage, while 27 more have yet to be called.

- This appears to be in-line with management’s earlier view that 98% of the contracts can be awarded by year-end – ahead of the earlier target of 94%-95%. The balance of awards would now focus mainly on the remaining systems/M&E contracts – where local participation would likely be minimal – in our view.

- We expect investor expectations to slowly gravitate towards the suppliers of building materials, particularly with the multi-year supply prospects for cement and steel.

- We continue to advocate Ann Joo Resources (steel), Lion Industries (steel), Lafarge Malayan Cement (cement), IJM Corp (via ICP: concrete-based products) and KimLun Corp (tunnel lining, segmental box girdles). 

- Further out, we envisage more contracts from future MRT lines. But, a firm decision would likely only be known by 1Q13 as the spectre of the 13^th  General Election looms near.  

Source: AmeSecurities