With MRT3 termination, up to RM100 bil rail jobs to vanish, says CIMB Research

KUALA LUMPUR (May 31): The RM40 billion third mass rapid transit project (MRT3) is “dead in its track” and the downturn in rail contracts has been set in motion, with up to RM100.1 billion worth of rail contracts vanishing, with the effects to be felt from contractors to building material providers, according to analysts at CIMB Investment Bank Bhd.

According to CIMB, the hardest hit would be firms with specialty in carrying out rail-related jobs such as Gamuda Bhd, MMC Corp Bhd, George Kent (M) Bhd, as well as any contractors with “rail exposure”.

In addition, CIMB said the surprise announcement will impact the rail job outlook for WCT Holdings Bhd, Malaysian Resources Corp Bhd, Sunway Construction Group Bhd and Gabungan AQRS Bhd.

At the same time, CIMB said Lafarge Malaysia Bhd too would be impacted as the projects’ cancellations dashed any hope of a surge in infra jobs to absorb the overproduction of cement, while Kimlun Corp Bhd, a producer of tunnel-lining segments and segmental box girders, will similarly not be spared. 

“We believe any upcoming big-ticket rail projects are now at risk of deferment, renegotiation or outright cancellation These include the Gemas-Johor Bahru electrified double tracking (EDT) project and the East Coast Rail Link (ECRL),” CIMB analysts Sharizan Rosely and Kamarul Anwar said in a sector note today.

“[We remain] Underweight and Reduce calls maintained for mostly all rail players. An upside risk to the sector call is a selective revival of contracts,” the analysts added.

As the government scrapped the RM110 billion 350km Kuala Lumpur-Singapore high speed rail, and the MRT3, CIMB warned that the RM8.9 billion Gemas-Johor Bahru EDT and the RM60 billion ECRL job could be at risk of being terminated. — theedgemarkets.com

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