Construction - BRT project goes large-scale
Recommendation: Over Weight
For the first time, a press article featured details of SPAD's plans for the Bus Rapid Transit project. The RM18bn estimated value for the 12 BRT routes was a positive surprise. Also, there are four new BRT lines costing c.RM6bn which is a high priority for SPAD. In our estimate, the open tender phase could begin in late 2H15. We believe the immediate potential beneficiaries are likely to be smaller/medium-sized contractors as major players already have their plates full. Sunway (Add) has nearly completed the country's first BRT job in Bandar Sunway. It has the competitive advantage and track record to bid for more BRT contracts. Maintain Overweight, with BRT as potential catalysts. Gamuda and Muhibbah Engineering are our top picks.
What Happened
Focus Malaysia has reported that there could soon be more news on the remaining 11 of the 12 packages of the Bus Rapid Transit (BRT) project. The BRT is a transit system that uses dedicated busways, with modern and universal access stations, integrated pedestrian access, rapid boarding, high service frequency and covers major catchment areas. This is a relatively new concept in Malaysia but is more established in other countries. An ongoing BRT job, which is also near completion, is a pilot project in Bandar Sunway (see tables overleaf and our cost estimations).
What We Think
The BRT project is in line with the government's public transport upgrade plans. Based on the average RM84m cost/km benchmarked on the ongoing BRT Sunway line, the cost of the entire 215km of BRT network works out to be a whopping RM18bn. This was the main positive surprise. The other good news is that the Land Public Transport Commission (SPAD) is rolling out four new BRT lines which are high-priority. We believe the pre-qualification/tenders could start at end-2H15 and could be more relevant to smaller or medium-sized pure contractors at this juncture. Funding and project structure are also yet to be revealed, but the article alluded to the fact that there could be more newsflow from SPAD in the coming months, which would be overall positive for the construction sector. It is also positive for the property sector given the spillover effects on land values, as was the case for the MRT project.
What You Should Do
We believe that Sunway could turn out to be among the big beneficiaries of the BRT (Add; target price RM4.00). The group's pure construction arm, Sunway Construction, was the first and only player to be awarded the RM454m pilot project in 2013. The BRT Sunway line was 72% completed as at end 2014. Our RM2bn new order book assumption for Sunway in FY15 excludes new potential in BRT.
Source: CIMB Daybreak - 13 March 2015
Recommendation: Over Weight
For the first time, a press article featured details of SPAD's plans for the Bus Rapid Transit project. The RM18bn estimated value for the 12 BRT routes was a positive surprise. Also, there are four new BRT lines costing c.RM6bn which is a high priority for SPAD. In our estimate, the open tender phase could begin in late 2H15. We believe the immediate potential beneficiaries are likely to be smaller/medium-sized contractors as major players already have their plates full. Sunway (Add) has nearly completed the country's first BRT job in Bandar Sunway. It has the competitive advantage and track record to bid for more BRT contracts. Maintain Overweight, with BRT as potential catalysts. Gamuda and Muhibbah Engineering are our top picks.
What Happened
Focus Malaysia has reported that there could soon be more news on the remaining 11 of the 12 packages of the Bus Rapid Transit (BRT) project. The BRT is a transit system that uses dedicated busways, with modern and universal access stations, integrated pedestrian access, rapid boarding, high service frequency and covers major catchment areas. This is a relatively new concept in Malaysia but is more established in other countries. An ongoing BRT job, which is also near completion, is a pilot project in Bandar Sunway (see tables overleaf and our cost estimations).
What We Think
The BRT project is in line with the government's public transport upgrade plans. Based on the average RM84m cost/km benchmarked on the ongoing BRT Sunway line, the cost of the entire 215km of BRT network works out to be a whopping RM18bn. This was the main positive surprise. The other good news is that the Land Public Transport Commission (SPAD) is rolling out four new BRT lines which are high-priority. We believe the pre-qualification/tenders could start at end-2H15 and could be more relevant to smaller or medium-sized pure contractors at this juncture. Funding and project structure are also yet to be revealed, but the article alluded to the fact that there could be more newsflow from SPAD in the coming months, which would be overall positive for the construction sector. It is also positive for the property sector given the spillover effects on land values, as was the case for the MRT project.
What You Should Do
We believe that Sunway could turn out to be among the big beneficiaries of the BRT (Add; target price RM4.00). The group's pure construction arm, Sunway Construction, was the first and only player to be awarded the RM454m pilot project in 2013. The BRT Sunway line was 72% completed as at end 2014. Our RM2bn new order book assumption for Sunway in FY15 excludes new potential in BRT.
Source: CIMB Daybreak - 13 March 2015
