KUALA LUMPUR: The open tender for civil works for the Mass Rapid Transit Line 3 (MRT3 Circle Line) could be issued as early as the second quarter of 2022 with an evaluation period of at least six months.
CGS-CIMB Research said the final contract of civil works are expected to be announced in the fourth quarter of 2022 after the evaluation period, while the commencement of civil works would be in phases, beginning 2023.
The research firm said under Mass Rapid Transit Corp Sdn Bhd's (MRT Corp) new strategy, MRT 3 Circle Line, will not adopt the single turnkey contractor structure as seen in MRT 2 and will likely divide the scope of the civil works into three to five main packages.
Each work package will be led by tier one contractors or consortiums undertaking private financing for the first two years before reverting to total government funding, likely in 2024.
However, CGS-CIMB Research did not discount potential execution risks such as delay in cabinet approval of MRT 3's hybrid funding model, low take-up by tier one contractors who are less willing to take on funding risks and potential uncertainties in land acquisition.
To note, the land acquisition cost is borne by the government, which could hold up site mobilisation and delay construction works, the research firm said in a recent research report.
MRT Corp is currently expecting the Cabinet's approval of the MRT3 Circle Line hybrid funding model by the end of this year.
Chief executive officer Datuk Mohd Zarif Hashim said the project structure is likely to be finalised in the first quarter of 2022 to determine how contractors can undertake the private sector funding portions of the civil works.
"If MRT 3 progress newsflow regains momentum in the coming months, interest on MRT 3 rail plays could make a comeback in the short-term as investors' perception of the MRT 3 project has been lukewarm due to delays and the lack of funding allocations as revealed in the key infra targets of 2022 Budget," CGS-CIMB Research said.
Meanwhile, the research firm also said the division in civil works appeared to be negative for the MMC-Gamuda joint venture.
Nonetheless, the civil work might be compensated by an estimated RM10 billion to RM15 billion (RM1 billion per km cost) single tunnelling package, supported by the MMC-Gamuda's track record in MRT 1 and MRT 2.
CGS-CIMB Research said the domestic rail supply chain will be maximised, including higher usage of industrial building systems (IBS) and more work package contractors.
This is to achieve a higher economic multiplier of three to four times than the low of two times for MRT 1 and 2.
CGS-CIMB Research said there might be execution risks, but MRT 3 sentiment could improve, given more clarity on the MRT 3 project in the first half of 2022.
"This should allay investor concerns over whether this mega rail project can move ahead with its pre-tender stages in 2022, and we view this as positive."
CGS-CIMB Research said has retained the sector on a Neutral stance on the construction sector but prefer Gamuda Bhd and IJM Corp Bhd for their rail credentials and strong balance sheet for MRT 3 private sector funding.
These companies would likely be potential frontrunners of Tier-One civil works tenders for the MRT 3 project.
"We also prefer HSS Engineers Bhd as the group could secure sizeable engineering consultancy scopes from MRT 3 ahead of the civil works tenders."