- The New Straits Times (NST) reported that Malaysia’s MRT line system may be extended to the recently unveiled Malaysia Vision Valley (MVV).

- Quoting sources, the NST report said it was possible to extend the MRT line from Putrajaya to Seremban via elevated structures.

- The MVV is an integrated development covering several strategic clusters to complement the growth of Klang Valley. Measuring 108,000ha, the project will cover Nilai, Seremban as well as Port Dickson. The targeted GDV for the MVV is between RM70bil and RM90bil, and is to be developed over 30 to 40 years.

- The report added that the Land Public Transport Commission (SPAD) would probably need to undertake a feasibility study before further proposals can be pushed forward.

- At the moment, the MRT Line 1 project – costing RM23bil – is well underway and is scheduled to be completed by the middle of next year. Construction works for the MRT Line 2 – linking Sg.Buloh with Serdang and Putrajaya –could commence in nine months. Earlier reports had indicated that MRT 2 could cost around RM28bil.

- On the other hand, it is still the early days for MRT Line 3, also known as the ‘circle line’. It is currently still at the planning stage.

- We believe any move to extend the MRT line southwards is in line with our earlier conviction that public transportation projects would feature prominently under the 11th Malaysia Plan (11MP).

- Based on current estimates, the NST report revealed that the MRT extension may cost around RM400mil for each km of elevated tracks. If the total length is 40km, the indicative budget is ~RM6bil.

- But for now, we believe the MRT 2 line would be at the forefront of investors’ radar, as newsflow on potential contracts approaches. Construction works could be awarded by 4Q, ahead of the roll-out of major contracts by mid-2016.

- For now, we believe the MMC-Gamuda JV is a firm candidate for the tunnelling portion of the MRT 2 line, having bagged the PDP role with the contract set to be signed by mid-2015. While it is too early to identify potential beneficiaries of the civil portion, we believe specialist contractors Econpile Holdings and Kimlun Corp would be good bets for the piling and tunnel lining segment jobs, respectively.

- Likewise, the building material players – Lafarge Malaysia, Ann Joo Resources and Lion Industries – could see renewed multi-year order flows when construction works accelerate.

Source: AmeSecurities Research - 4 Jun 2015