Shortlist of HSR frontrunners just market sensing, parties to start on clean slate — CGS-CIMB

• So far, almost 30 firms have submitted a request to purchase the RFI documents, while the project will be via a design-finance-build-operate transfer (DFBOT) model with the asset to be handed over after the concession period.

KUALA LUMPUR (Sept 13): The shortlisting of companies prior to the sale of the request for information (RFI) documents for the revived Kuala Lumpur-Singapore high-speed rail (HSR) project was just a market sensing exercise and "all parties now start on a clean slate", said CGS-CIMB.

The five companies that were believed to have been shortlisted include YTL Corp, MMC Corp Bhd, Malaysian Resources Corp Bhd (MRCB), WCT Holdings Bhd and Berjaya Land Bhd (BLand), said the research house in a note on Wednesday.

So far, almost 30 firms have submitted a request to purchase the RFI documents, while the project will be via a design-finance-build-operate transfer (DFBOT) model with the asset to be handed over after the concession period.

These were some of the key takeaways from a luncheon CGS-CIMB had hosted for clients and key management of MyHSR Corp Sdn Bhd, which is responsible for the development and implementation of the proposed HSR.

As the project is currently in the RFI stage, CGS-CIMB said that several details such as the structure of the HSR, potential cost, land acquisition, transit-oriented development (TOD) at its stations and timeline, still remain unanswered.

“In our view, the key is obtaining the buy-in from Singapore and resolving issues in the past, such as the AssetCo structure and linking the terminus of the HSR in KL to the ERL,” it said.

However, Prime Minister Datuk Seri Anwar Ibrahim recently quoted saying that the Minister of Transport will engage with Singapore after the government decides the way forward for the project subsequent to the completion of the RFI. 

CGS-CIMB maintained its “overweight” stance to the construction and materials sector, anticipating a potential rollout of larger-scale projects stemming from the HSR.

The research house said that MyHSR Corp also touched on potential overlap of the HSR alignment with the Gemas-Johor Bahru (JB) double-tracking rail and pointed out that the HSR will serve different corridors and target different customers.

“The HSR will be more for business travellers who value time while the medium-speed double-tracking line caters to the more price-conscious. At a later stage (Phase 2), the HSR may also extend to Bangkok,” it said.

In terms of land acquisition, CGS-CIMB noted that the state (Johor) may also acquire land which is deemed beneficial to the economic development of Malaysia.

CGS-CIMB has named YTL Corp Bhd and its 78.6%-owned subsidiary Malayan Cement Bhd (MCement) and HSS Engineers Bhd as the top beneficiaries from the HSR’s revival, according to a note on Wednesday (Sept 13).

“YTL could be a front-runner given it was the original HSR promoter in 2008-2009 and was in 2018 appointed as project delivery partner (PDP) for HSR’s southern section, its experience in running the express rail link (ERL) and construction of Gemas-Johor Bahru double tracking, its cement arm MCement provides synergistic benefits,” it said.

CGS-CIMB has “add” calls for YTL Corp with a target price (TP) of RM1.91, MCement with a TP of RM5.55 and HSS Engineers with a TP of 80.8 sen.

Meanwhile, key downside risks would be political instability and rising raw material costs and labour.

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