“MRT 3’s potential revival, along with other infrastructure initiatives, signals a promising FY2025 for Malaysia’s construction sector, with key players poised for gains.”
Kuala Lumpur, 02nd Sept 2024, 17.27pm – The possible revival of the MRT 3 project, along with the resurgence of other government infrastructure initiatives, suggests a more promising outlook for the construction sector as FY2025 approaches, according to CGS International.
On August 30, Mass Rapid Transit Corporation Sdn Bhd (MRT Corp) revealed a revised public display for MRT 3, scheduled to run from September 2 to December 2.
“Although the public display indicates the government’s intent to bring back the MRT 3 project, the timeline remains unclear,” CGS stated in a note on Monday.
The public display exercise includes 35 designated locations, eight MRT information kiosks, and 27 MRT information trucks at key sites, providing the public with a chance to review and offer feedback on the proposed alignment, locations, and other project details.
This revision follows a proposed change in the alignment, necessitating a new railway scheme.
The MRT 3, known as “The Circle Line,” is planned to cover 51 kilometers around Kuala Lumpur’s perimeter, integrating with existing MRT, LRT, KTM, and monorail lines through 10 interchange and connecting stations.
CGS also noted the government’s broader goal to prioritize infrastructure projects to stimulate the economy, with expectations to expedite the awarding of certain projects, such as the Penang LRT and Penang International Airport, by the fourth quarter of 2024.
The exact significance of the MRT 3 in the government’s plans remains unclear, with the market largely discounting its continuation.
“We believe the MRT 3 could be included in Budget 2025 and potentially rolled out next year. However, there are indications that the KL-SG High-Speed Rail (HSR) might take priority over the MRT 3,” the report noted.
The potential revival of the MRT 3 would improve market sentiment, giving contractors opportunities to secure large-scale projects for their order books.
“Overall, this supports our view that 2025 could be a stronger year for the construction sector, driven by a resurgence in government infrastructure projects and continued foreign direct investments (FDIs) in data centers, semiconductor factories, and industrial warehouses,” CGS added.
Gamuda Bhd, the lowest bidder for CMC 303 tunneling before a re-tender, and YTL Corporation Bhd, the lowest bidder for CMC 302 before a re-tender, are poised to gain the most from the MRT 3 project as the construction sector continues to grow.
CGS also identified other potential major beneficiaries, including WCT Holdings Bhd, Sunway Construction Group Bhd, and IJM Corporation Bhd, all of which were involved in constructing MRT 1 and MRT 2. Additionally, building material suppliers like Malayan Cement Bhd and piling contractors like Econpile Holdings Bhd are expected to benefit.
The government’s current estimate for the MRT 3 project stands at RM45 billion, a reduction from the RM68 billion projected in 2018. MRT Corp has also announced plans to incorporate private sector funding and non-government payment sources.
CGS continues to maintain an “overweight” rating on the construction sector, driven by expectations of robust project flows from data centers, semiconductor factories, and industrial warehouses, along with a revival in government infrastructure spending. However, potential risks include delays in contract awards, competition from foreign contractors, and rising raw material costs.
