CGS-CIMB: Hybrid funding model now the challenge for MRT3 implementation

KUALA LUMPUR (March 8): While the government has granted the approval to proceed with the Mass Rapid Transit Line 3 (MRT 3; Circle Line) project last Friday (March 4), CGS-CIMB Securities Sdn Bhd said the focus has now shifted to the execution and success of the hybrid funding model, given the government’s limited fiscal space. 

"We view the greenlight granted for the MRT 3 project as the biggest positive, as it provides mega job continuity post-pandemic. 

"However, the challenge now lies in the execution of the proposed hybrid funding model which would require strong take-up and sizeable private sector participation to kick-off the civil works initial stages," it said in a note on Monday (March 7).

The MRT 3 hybrid model is the first of its kind under the purview of project owner Mass Rapid Transport Corp Sdn Bhd (MRT Corp). 

The stockbroking house expects MRT Corp to accelerate its industry engagements and finalise the hybrid project structure and alignment prior to potentially calling for tenders, expected in the fourth quarter of 2022.

It also turned more bullish on MRT 3’s earlier potential beneficiaries, namely for the engineering and project management services (EPMS) packages, which are likely to be dished out during the design stages and prior to civil works awards.

“We are also upbeat on the beneficiary of larger-value MRT 3 packages with clearer advantage over other potential contractors,” it said.

Overall, the brokerage firm has kept its "Neutral" rating on the construction sector unchanged, following Friday's announcement.

It said with the absence of direct government funding for MRT 3 in Budget 2022, the upside risk to its unchanged "Neutral" sector rating is to have more clarity and strong take-up of the hybrid funding proposal. 

"The downside risk is job delays. We are neutral on the other new infrastructure initiatives, as the impact on order book would be immaterial," it said.

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