Construction sector

Maintain overweight: We met the promoters of Bandar Malaysia to get a better sense of the prospects of the much-talked about Bandar Malaysia.

The meeting also provided an overview of the project’s master plan and why this new multi-year mega development is touted as the next emerging city in greater Kuala Lumpur.

Bandar Malaysia is the redevelopment of the former Sungai Besi airport. We toured the scaled-down model of the entire Bandar Malaysia, which is reportedly valued at RM200 billion gross developmental value over 25 years, according to earlier estimates.

The master plan incorporates an integrated “underground” city that sprawls over 63 million sq ft (5.85 million sq m) of gross floor area (GFA) — the second largest in the world — compared with the above-ground GFA of 103 million sq ft.

Overall, the site covers a total area of 486 acres (196.7ha), which is almost five times the size of the Kuala Lumpur City Centre’s site including the surrounding park.

The briefing clarified that the focus in 2017 is to finalise the best model to roll out the 60- to 100-acre transit-oriented development (TOD), which is to be the first of the three phases.

The rationale is to accommodate the Kuala Lumpur terminus of the planned Kuala Lumpur-Singapore high-speed rail (HSR) which is to be integrated with the TOD.

It appears that the TOD could shape up to be a scaled-up version of KL Sentral (72 acres or 29.1ha), functioning as a hub for other public transport components including the mass rapid transit Line 2, the HSR and the Express Rail Link.

We gather that while the residential and commercial components could attract property developers at the later stage, overall construction/infra opportunities could be as much as RM50 billion over several years given the project’s greenfield nature.

Malaysian Resources Corp Bhd is exploring the possibility to collaborate with the master developer on the TOD. We also consider WCT to be the more prominent earthworks contractor given its experience in the refinery and petrochemical integrated development and the Tun Razak Exchange.

Key events to watch out for in 2017 include the official launch of phase 1 of Bandar Malaysia, likely in mid-2017, and an international tender for phase 1 of the TOD. In our view, initial tenders could be called in by end-2017 at the earliest.

For the first half of 2017, we remain positive about the potential pre-election-driven contract award momentum.

Among domestic rail contractors, Gamuda Bhd remains the biggest proxy for construction and our top big-cap pick. The key downside risk is job delays. — CIMB Research, Jan 4

This article first appeared in The Edge Financial Daily, on Jan 6, 2017. Subscribe to The Edge Financial Daily here.

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