Gamuda a top pick to secure East Coast Rail jobs

Posted on 11 August 2017
 

Source: The Star Online

Gamuda Bhd remains a top pick at CIMB Research on expectation that the construction group will be a strong contender to secure sizeable contracts to build the East Coast Rail Link (ECRL).

Other contractors it expects to be in the running for jobs related to the RM55bil rail project includes IJM Corp Bhd, Malaysian Resources Corp Bhd (MRCB), WCT Holdings Bhd, Muhibbah Engineering Bhd and Lafarge Malaysia Bhd.

“We expect the tender phase to gain momentum over the coming months and reveal more colour on the tender structure,” CIMB Research said in a note to clients yesterday.

“We would also not discount the potential of earlier awards for selected packages,” it added.

Prime Minister Datuk Seri Najib Tun Razak said on Wednesday at least 30% of the contract value will be awarded to Malaysian contractors.

In terms of economic benefit, Najib said 80,000 jobs are expected to be created.

The ECRL is an electric railway project measuring 668km in length connecting the East Coast states of Kelantan, Terengganu, and Pahang to Greater Kuala Lumpur.

CIMB Research estimated that at least RM16bil worth of construction jobs would be set aside for local companies.

Under the agreement, China Communications Construction Company (CCCC) is the main contractor and it would undertake 70% of the total project.

CIMB Research pointed out that based on the past track record for rail-related awards, its assessment of potential beneficiaries of ECRL includes viaduct specialists, civil works specialists for bridges, contractors specialising in piling for rail, station contractors, cement players, and steel companies.

“While other contractors stand to benefit as well, we believe Gamuda could emerge as the biggest player for ECRL,” it said.

The group’s target of RM10bil contract wins remains unchanged.

“We maintain our overweight sector rating,” it said, adding that the downside risks include project delays and funding.

The research house noted that 85% of ECRL would be financed via a soft loan from Exim Bank of China with 3.25% interest and a seven-year moratorium.

 



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