Apr 21, 2010

Klang Valley LRT Projects: Overweight On Construction

LRT project gains traction

•  Pre-qualified parties for the first package of civil works under the RM7bil-Klang Valley Light Rail Transit (LRT) extension works are to be announced soon, said The EdgeWeekly in a report last Saturday. Contract involves the first 9.2km of the Kelana Jaya line. According to the report, six contractors are in the running for the civil works portion. This includes the UEM Group, IJM Corp Bhd (IJM) and Putrajaya Perdana Bhd.   
•  We gather that one main contractor and at least ten qualified subcontractors would lead the works package. Contract award is slated to be out within two months – with construction works
scheduled to start by November. Based on a cost/km of RM200mil, we estimate that contract value for this package could be worth about RM1.8bil.
•  According to earlier reports, Government-backed Syarikat Prasarana Negara Bhd (SPNB) had indicated that the entire Klang Valley LRT extension works would take up to three years to complete. Meanwhile, award for the M&E portion – including systems works – are likely to bypass the pre-qualification stage. Foreign-based outfits such as Canada’s Bombardier, Global Railway Industries and France’s Alstom are reportedly front-runners for these jobs. 
•  Flipside, we understand there could be some delays to the 17.7km-long Ampang Line due to some unresolved outstanding issues with a couple of final stations. In turn, this could result in
a major shift in alignment of routes. This is exacerbated by: (1) The large number of contractors involved in the pre-qualification process; and (2) Some initial setbacks faced by SPNB in raising the RM2bil-required to kick-start the LRT works.      
•  But we believe imminent award of the first contract for the Kelana Jaya line should prod rollout of remaining works under this massive project. This follows a recent contract for installation of a counter less ticketing system for both the Ampang/Kelana Jaya lines to a JV comprising Iris Corp Bhd and Spanish IT outfit Indra Systemas SA earlier this month.
•  The potential winners? Based on operating track record, the UEM Group – along with IJM and Gamuda Bhd (Gamuda) – are leading contenders. Nevertheless, we do not discount possibility of local consortiums being formed to pave the way for other contractors to participate at sub-contractor level, including WCT Bhd (WCT).
•  Other clear beneficiaries would be local steel millers such as Ann Joo Resources Bhd and Lion Industries Bhd with a significant portion of steel required for extension works. Price of local steel bars has increased to RM2,200/tonne from RM1,900/tonne in December last year.   
•  More importantly, we are encouraged by the steady pick-up in news flow on the two major LRT jobs in Malaysia. Apart from the Klang Valley LRT extension works, it was reported two weeks ago that the Federal Government was studying a proposal to extend the track line for the new Cheras-Kota Damansara LRT route by another 16km.   
source: AM Research