support@kopiandproperty.com

Previous
Next

Advertisement Banner

MRT 3 by Chinese / Japanese consortium (build and finance), probably.

This is quite a big news. It seems that MRT Line 3 will now be built via the build and finance way instead of the Project Delivery Partner way as per MRT SBK (Line 1) or MRT SSP (Sungai Buloh – Serdang – Putrajaya). Here’s that news in TheStar.  This decision has rattled the share price of Gamuda. The share price dropped 26 cents today (5.13%), to RM4.81. At one point, it was as low as RM4.73 per share. The reason for this is because the build and finance way meant that the builder is also the financier and this entails having at least 90 percent of the expected cost. This is RM35-40 billion. This is a sum that Gamuda would not be able to fork out and this was the reason why only the Chinese or the Japanese builders could do it. They have the support from their governments.
Remember the Penang Bridge 2? It was built by the China Harbour Engineering Co Ltd (CHEC) with a super huge loan from the Chinese government. The consolation point is that the tunnelling portion would most probably be awarded to Gamuda. (I seriously think it should lah. If a local company is competent and competitive enough, we should think local first.)  As per the article, AmInvest Research said, “We take comfort that Gamuda’s roles in MRT3 are potentially only reduced, but not eliminated following the latest development.” It has valued Gamuda’s construction business at 16 CY18 net profit and says that it is in line with AMInvest’s benchmark one-year forward price-to-earnings of 14-16 times for large-cap construction stocks. The full article in TheStar here. 
There is a relevant article prior to the Gamuda share price article.  This one is in TheEdgeMarkets and it tells of Mass Rapid Transit Corp Sdn Bhd (MRT Corp) which has invited local construction and infrastructure development firms to participate in the tender process to build, on a turnkey basis, and provide financing for the upcoming third mass rapid transit (MRT3) line. According to an earlier report, CIMB Investment Bank Bhd had estimated the construction cost of MRT3 to range between RM35 billion and RM40 billion. Their estimation was based on assumption of a cost of RM1 billion per km for the underground portion benchmarked against MRT 2 as well as RM500 million per km for the above-ground portion. In the recent Budget 2018 speech, Prime Minister Datuk Seri Najib Razak said the government will expedite the construction of MRT3 or Circle Line and expects it to be completed two years earlier than estimated; from 2027 to 2025.
Build and finance is a model which is becoming common, especially for mega projects where the construction companies have the support of their government. The reason is simple, they (these companies) may not have too many domestic opportunities or it has capacity to take up more jobs. These companies are building everywhere in the world. Welcome them loh. Cheers.
written on 7 Nov 2017
Next suggested article: MRT or not, still need to know what we buy

Property Investment always start with knowledge. Equip ourselves with more here.

Motion arrow towards right
Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Motion arrow towards right
Share on facebook
Share on twitter
Share on linkedin
Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

Previous
Next

Advertisement Banner

Facebook Comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Table of Contents

Most Recent Posts

join the family

Like us for daily investment news and more

Hit the like