MMC-Gamuda joint venture (JV) announced that it has signed the Project Delivery  Partner  (PDP)  agreement  for  Klang  Valley  Mass  Rapid  Transit Line 2 (MRT2). The estimated construction cost is RM28bn, excluding land cost.  The  PDP  fee  is  6%  of  total  project  cost  with  KPIs  on  delivery  on target  cost,  timeline,  quality  and  safety.  MRT2  Phase  1  (Sungai  BulohSerdang) is slated for completion by 31 July 2021 and Phase 2 by 31 July 2022.

Comments:  The signing of the  agreement  will allow the JV to accelerate the  implementation  of  this  project.  The  terms  are  in  line  with  the companies’ guidance and has been incorporated in our earnings forecasts for  MMC  Corp  (BUY)  and  Gamuda  (BUY).  Public  feedback  on  the alignment  is  ongoing  until  17  August.  Detailed  planning  on  project implementation  will  commence  once  the  alignment  is  approved. Construction  contract  awards  are  expected  to  start  in  1H16.  The implementation of MRT2 will improve the earnings visibility for MMC and Gamuda  as MRT1 will be completed by mid-2017. Maintain our BUY calls on  Gamuda  with  RM5.65  target  price  and  MMC  with  target  price  of RM3.15.

Source: Affin Hwang Capital Research - 14 Jul 2015