KUALA LUMPUR: Construction players IJM Corp Bhd (IJM) and Malaysian Resources Corp Bhd (MRCB) are likely to undertake bigger role in the Mass Rapid Transit Line 3 (MRT3 Circle Line) project should the idea of private funding materialises.
Kenanga Investment Bank Bhd (Kenanga Research) in a note believe both players have relatively bigger and stronger balance sheet, enabling them to gear up to provide funding needs.
The research firm also noted that IJM and MRCB together with Gamuda Bhd are the top three contractors who can shore up the highest borrowings.
"We are net positive on the new details as behind-the-scene progress is picking up fast. Despite the stretched out construction period of 10 years, and should our guesstimate contract quantum of RM32.9 billion be proven accurate – it would be an upside surprise," Kenanga Research said, while reiterating an Overweight call on the construction sector.
Gamuda might be the beneficiary due the longer-than-expected underground portion and being the project lead, while Kimlun Corp Bhd could also benefit from the project.
Kimlun being an industrialised building systems (IBS) precast expert, who is also a major supplier to key infrastructure projects in Malaysia and Singapore, would benefit from the supply of segmental box girders (SBG) used above ground and tunnel lining segment (TLS) used underground for the MRT3 project.
The research firm said more TLS components are required due to the longer-than-expected underground portion, commanding better margins than SBGs.
Mass Rapid Transit Corp Sdn Bhd (MRT Corp) had on Tuesday planned to raise up to 30 per cent in capital to fund the MRT3 via private funding arrangement.
Chief executive officer Datuk Mohd Zarif Hashim said the rail developer is keen to assist the government to ease its burden, leveraging on the hybrid financing model with the private initiatives (industry players).
"We have issued a request for information (RFI) to industry players, outlining our intention to transform the conventional building methods to construction manufacturing, while developing local capabilities with technologies," he said at a media briefing.
Kenanga Research said a deferred payment scheme of between 10 per cent and 30 per cent of total contract cost can be adopted to conserve government's cash flows.
Scheduled to begin its tendering exercise in August, the 10-year MRT3 development will be built in five phases across 10 interchange stations, spanning throughout 50km circle line in the greater Klang Valley with about 30 or more stations around Kuala Lumpur.
Of the total rail lines, about 40 per cent of the route will be underground.
The total MRT3 contract cost could be about RM32.9 billion whereby the 20km underground portion would cost RM19.42 billion, while the 30km on the above ground rail would cost about RM13.5 billion.
To recap, MRT2 which spanned 52.2km cost the government RM30.53 billion comprising 13.5km underground portion which cost RM13.11 billion and 38.7km above ground costing RM17.42 billion.