Monday, 23 April 2012

Construction Sector - Gamuda-MMC JV accepts RM8bil tunnelling award OVERWEIGHT


- Gamuda reported on Bursa Malaysia last Friday that  MRT Corp has awarded the underground package of the Sg.Buloh-Kajang MRT to its JV with MMC Corp. The scope of works includes the design and construction of tunnels, seven underground stations and other associated works. This encompasses a total length of 9.5km that traverses from Semantan north portal until Maluri south portal.  As expected, the contract value is estimated at around RM8.3bil (Gamuda’s effective 50% stake: RM4.1bil).

- We estimate that the award of the tunnelling contract forms part of an estimated RM10.5bil worth of contracts – or 27 out of a total of 90 work packages – that have been awarded thus far.  The major jobs that have been awarded included two elevated viaduct packages worth RM974mil (v6) and RM764mil (v5) that have been awarded to IJM and Ahmad Zaki Resources Bhd (AZRB), respectively. The segmental box girdle package for certain sections worth around RM223mil was won by KimLun Corp.

- More importantly, we expect this latest award to expedite the award of other remaining packages within the SBK line. To be sure, the tunnelling package was one of three major packages due to be awarded this month.  

- From our channel checks, the other two packages are elevated viaduct works that may include v1 (Sg.Buloh-Kota Damansara: Bumi category) and v4 (Section 16-Semantan portal: open category) with an average contract value of between RM500mil and RM1bil. While the package v4 remains an open affair with the 11 pre-qualified contractors in the fray, we gather that Ahmad Zaki Resources (AZRB) along with Naim Holdings and TRC Synergy could be in the running.

- This could be followed by the dishing out of another two major packages next month, which are likely to involve viaduct works again for v2 and v7.

- Similarly, we also expect the award of the tunnel lining segment to be forthcoming by end-2Q11, for which KimLun could once again emerge as a strong contender along with MTD ACPI and privately-held Hume Industries.

- As for the station works (8 packages), we fancy WCT to launch a strong bid for the five packages under the open category while Pintaras Jaya could shape up as a contender for the piling/sub-structure works.

- We also envisage significant gains for the suppliers of building materials when construction works on the MRT project gather momentum. We expect maiden orders to materialise as early as July 2012 when physical works swing into motion. Within this space, we like Ann Joo Resources (steel), Lion Industries (steel) and Lafarge Malayan Cement (cement).

- An additional two MRT lines costing a combined RM30bil would provide further impetus to the local construction industry, although a decision is unlikely to be forthcoming before the 13th  General Election.   

Source: AmeSecurities

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