THE BUZZ
Malaysia Steel Works (KL) (Masteel) told Bursa Malaysia yesterday that Metropolitan Commuter Network SB, a joint venture between Masteel and KUB Malaysia, has received an offer of land from the Transport Ministry. The 14.31 hectare land, located in Kempas in Johor, will be the site for the Iskandar Malaysia commuter train depot.
OUR TAKE
Quick recap on rail project. In January 2011, Masteel and KUB Malaysia Bhd (KUB) announced a Joint Venture to supply to and operate a 106.5km rail transit network within Iskandar Malaysia and Woodlands in Singapore. The project cost was estimated at RM1.35bn.
Positive progress, but it may be a long wait. Indeed, the offer of the land on which to construct the train depot is positive for the proposed rail project. Nonetheless, we continue to think that the final approval from the Government may take time. According to the last update announced by the company in August 2012, MCN is still waiting for a meeting with the Ministry of Transport to re-table its revised proposal based on input from the respective ministries involved before the proposal can be re-submitted to the Economic Council in the Prime Minister’s Department for final approval. Meanwhile, management said the size of the land is sufficient to accommodate the depot and that the JV Company will submit the necessary applications to Perbadanan Aset Keretapi to apply for the said land.
Positive progress, but it may be a long wait. Indeed, the offer of the land on which to construct the train depot is positive for the proposed rail project. Nonetheless, we continue to think that the final approval from the Government may take time. According to the last update announced by the company in August 2012, MCN is still waiting for a meeting with the Ministry of Transport to re-table its revised proposal based on input from the respective ministries involved before the proposal can be re-submitted to the Economic Council in the Prime Minister’s Department for final approval. Meanwhile, management said the size of the land is sufficient to accommodate the depot and that the JV Company will submit the necessary applications to Perbadanan Aset Keretapi to apply for the said land.
Maintain NEUTRAL. Given that discussions with the relevant authorities on a rail concession such as this is likely to be long drawn-out, we have not incorporated any contribution from this project. That said, the medium-term outlook for the steel industry remains challenging, especially in view of renewed concerns over Europe’s protracted debt crisis and China’s slowing economic growth. As such, we prefer to keep our NEUTRAL rating on Masteel, with a FV of RM0.83, based on a 0.33x FY12 BV, or -1.0 std of the stock’s historical trading range.
Source: OSK
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