• Still OVERWEIGHT; Top Picks: Gamuda, Kerjaya Prospek, Sunway Construction (SCGB). We recently paid a visit to the public inspection kiosk for Mass Rapid Transit 3 (MRT3) at the MRT TRX Station and felt upbeat on the public’s receptiveness towards the project. Recall that Mass Rapid Transit Corporation (MRT Corp) is conducting the public inspection exercise from 2 Sep to 2 Dec 2024 to gather feedback from the public on the proposed alignment. We believe the rollout of MRT3 will provide a new stream of additional jobs for contractors.

• The three-month public inspection exercise is in accordance with Section 84 of the Land Public Transport Act, which features detailed information such as alignment maps, site plans and project details. MRT3 is slated to have 32 stations (22 elevated, 7 underground and three provisional), with an alignment of 51km ie 39km elevated and 12km underground (Figure 8).

• Ridership of existing MRTs strengthens the case for a circle line. Based on Prasarana Malaysia Berhad’s data, ridership of the existing Putrajaya and Kajang MRT Lines continues to reach new highs. The number of passengers on the Putrajaya MRT Line and Kajang MRT Line stood at a record high of 4.3m and 7.5m in July this year (Figures 5 and 6). Likewise, the Light Rail Transit (LRT) lines for Kelana Jaya and Ampang recorded the highest number of passengers, at 7.6m and 5.6m. As such, the need for the MRT3 circle line is inevitable to address the higher usage of public transportation in the Klang Valley.

• What’s after the public inspection? Based on the timeline shared at the public inspection kiosk (Figure 7) – the Final Railway Scheme approval is expected to take place in 4Q24 after the public inspection exercise concludes on 2 Dec. Meanwhile, construction should begin sometime in 2026 (targeted completion in 2032) during which we expect the land acquisition process to be completed or close to its tail end. Therefore, we conservatively view that MRT3 contract awards could either take place in late 2025 or in 1H26 based on the timeline for MRT1 and MRT2 (Figures 10 and 11).

• Potential beneficiaries include contractors with rail credentials in the previous MRT lines, namely Gamuda, Malaysian Resources Corp, SCGB and IJM Corp (Figure 9). Contractors such as Econpile, Gabungan AQRS and Kimlun (KICB MK, NR) may also stand a chance to participate as subcontractors premised on their track record not just in the previous MRT lines but also other rail projects such as LRT3.

• We envisage some details on MRT3 to be announced during the upcoming Budget 2025 such as the funding mechanism, latest estimated cost and also if a fresh round of retendering is required. Recall that in the revised Budget 2023 (tabled in Feb 2023), the Government announced its intention to review the cost of the MRT3 project in the hope of reducing the total amount to below MYR45bn from the estimated MYR68bn in 2018.

• Key downside risk: Longer-than-expected delays for its rollout beyond 2026.

Source: RHB Securities Research - 13 Sept 2024