THE BUZZ
The MalaysianInsider reported that MRT Corp has officially confirmed that the MMCGamuda joint venture has won the tunneling job for the Klang ValleyMy Rapid Transit (KV MRT) Sungai Buloh-Kajang (SBK) line with its bid at RM8.2bn. The decision was made at a One Stop Procurement Committeemeeting chaired by Prime Minister Datuk Seri Mohd Najib Razak in Parliamentyesterday.
OUR TAKE
Surprise, surprise, surprise. Although neither MMC nor Gamuda have made any announcement on Bursa Malaysia in relation to the saidcontract, we believe MRT Corp'sstatement is likely to be genuine as the online report quoted a statement fromthe corporation. We deem the announcement within our expectations, withGamuda's portion working out to be RM4.1bn given its effective 50% stake in theJV with MMC. We are not surprised that the JV has emerged as the ultimatewinner given its expertise and experience with the Stormwater Managementand Road Tunnel (SMART) project, as well as the Swiss Challenge conditionfavouring local contractors over foreign parties.
Details on thepackage. The quantum of the said job is at the higher end of our previous estimate for RM7bn-RM8bn. From our recentconversation with Gamuda's management, the 9.5km underground tunnel comprises 7 underground stations linking Semantan to Maluri. Works are expected tostart as early as 2Q12 and the target completion date has been set for June2017. We also understand that the underground package will be directlysupervised by MRT Corp, as opposed to the elevated portion, with MMC-Gamuda JVbeing the official overseer as it had earlier been appointed Project DeliveryPartner.
BUY. While wedeem the announcement within our expectations, we believe that it more importantlyimplies that the implementation of the much awaited KV MRT project is on schedule. With that, we expect theremaining 6 out of the 8 packages on the elevated portion to be dished outprogressively over the next 2 months. Thisjives in with our bullish view on the construction sector as a whole as webelieve that trading sentiment will improve on the burgeoning news flow. On Gamuda per se, we are revisiting our model andtweaking its share of the tunnelingworks from RM3.75bn previously to RM4.10bn, in line with the news report.Consequently, our SOP-based FV is bumped up to RM4.58 (from RM4.57 previously).Maintain BUY.