PETALING JAYA: The termination of the Kuala Lumpur-Singapore high speed railway (KL-SG HSR) bilateral agreement, movement control order (MCO) 2.0 and the state of emergency declaration have dampened the construction sector’s catalyst-driven positive outlook for first-half 2021, according to CGS-CIMB.
“At this juncture, we feel that the speed of the construction sector’s recovery could remain muted but still backed by Budget 2021’s RM37 billion direct infrastructure allocation,” it said in a report.
From its channel checks, the research house found that a revised version of the MRT 3 project could be given the green light ahead of following the termination of the SG-KL HSR project, ahead of the ongoing feasibility studies on the alternative Kuala Lumpur-Johor Baru high speed rail (KL-JB HSR).
It highlighted that one of the key developments for the MRT3 project is a proposal for up to a 40% cut to the original cost of RM45 billion due to the removal of certain underground scopes with a longer above-ground alignment for the entire line.
CGS-CIMB noted the discussions among stakeholders have shifted towards implementation as the government is considering to fast track the project, subject to the availability of funding.
It stated the funding model will likely be similar to MRT 1 and MRT 2, via bonds raised by Danainfra and that the turnkey joint-venture contractor for MRT 2 is upbeat on MRT3 project given that Budget 2021 has allocated an undisclosed amount to kickstart the project.
As for the key HSR development, the research house opined that the removal of the AssetsCo component and the pursuit of a likely KL-JB HSR line will give Malaysia full control over project procurement, alignment and land acquisition, but the timeline for the process remains unknown.
It said the new feasibility studies will likely consider the addition of a spur line to KLIA, a potential 30% cost reduction due to the removal of AssetsCo and minimising the cost of stations.
“The government is likely to pursue a private sector funding model to enable the project to commence two years ahead of the original target,” it said.
With the changes in the HSR project, the alternative is projected to be 30% cheaper to the original RM60 billion cost estimate (excluding rolling stock and systems) and it is projected to start two years earlier, in 2022.
Together, CGS-CIMB calculated that the cost-cutting measures from the proposals translate to an estimated RM63-74 billion in combined potential civil works against an initial estimate of RM105 billion, which remains a huge catalyst for the sector’s job outlook.
“However, our reservations about the MRT 3 and new HSR projects lie in the timing risks/uncertainties brought about by the political landscape, which could remain in a state of flux till 2H21F.”
As for the state of emergency declaration, since it will likely persist until August this year, this leaves the 12th Malaysia Plan (MP) as the only leading indicator for a potential longer-term recovery phase for the construction sector.
CGS-CIMB stated while it remains to be seen if political overhang will lead to a delay in the implementation of recovery initiatives for the construction sector, the assessment of the sector based on the recent events points to an unexciting first half in terms of sector news flow.
However, it opined that MCO 2.0 may impact the sector’s earnings per share less severely compared with the first one, as it does not entail a stop-work order and will not cause a severe disruption to construction works and the building material supply chain.
With that, the research house has decided to maintain a neutral call on the sector, with its preferred stocks being YTL Corp, IJM Corp and MRCB.
Source: The Sun Daily
No comments:
Post a Comment