THE BUZZ
Various media sources reported that MRT Corp has officiallyconfirmed that the MMCGamuda joint venture has won the tunnelling job for theKlang Valley My Rapid Transit (KV MRT) Sungai Buloh-Kajang (SBK) line with itsbid 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 has made any announcement on Bursa Malaysiain relation to the said contract, we believe MRT Corp's announcement is likely to be genuine giventhe official statement from the corporation. We deem theannouncement within our expectations, with MMC's portion working out to beRM4.1bn given its effective 50% stake in the JV with Gamuda. We are notsurprised that the JV has emerged as the ultimate winner, given its expertiseand experience with the Stormwater Management and Road Tunnel (SMART) project,the tunnelling works for the Double Track Rail project as well as the SwissChallenge condition favouring local contractors over foreign parties.
Details on thepackage. The quantum of the said job is at the higher end of our previousestimate of RM7bn-RM8bn. Works areexpected to start as early as 2Q12, while the target completion date has beenset for June 2017.
Maintain Trading BUYcall. The clinching of this contract by the MMC-Gamuda JV is certainlywithin our expectations. The amount ofRM8.2bn came in slightly above our earlierexpectations of M8bn, but this only has the effect of bumping up our SOP fair value on MMC from RM3.70 to RM3.71. To note that in our SOP calculation, MMC's Engineeringbusiness (namely the Double Track, the MRT PDP and the MRT tunnelling) comprises23% of the total SOP value given our high 16x PER multiple ascribed to the sector.