Additional routes for Cheras-Kota Damansara line Construction Sector report OVERWEIGHT

  • The Federal Government is studying a proposal to extend the new Light Rail Transit (LRT) line between Kota Damansara to Cheras to Sungai Buloh and Kajang, said Bernama news agency in a report yesterday. Additional routes are:

(i) Kota Damansara to Keratapi Tanah Melayu Bhd (KTMB) station in Sungai Buloh (3km) – This is to provide better integration with the northern commuter train services.
(ii) Cheras to Kajang (9km) – Facilitates integration of new line with KTMB’s commuter services from south.

(iii) Additional line from Uptown Damansara Utama to Kelana Jaya (4km) – This is to overcome traffic congestion along the Lebuhraya Damansara Puchong highway.

  • Although not entirely a surprise, we take a mildly positive stance on this piece of news. Yes,the Cheras-Kota Damansara project has yet to officially endorsed by Federal Government. But we gather that the project stands a good chance of taking off due to its significant economiclinkages to the Malaysian economy. Moreover, the proposed line extensions could be crucial tothe Federal Government’s ambitious plans to develop 3,000 acres of land in Sungai Buloh intoa new hub within the Klang Valley – in our view.

  • We estimate that the original 43km-long Cheras to Kota Damansara LRT line costs between RM8bil to RM9bil. The additional 16km-route  would extent to Sungai Buloh and Kajang – and increase total length of new line to 59km. This would suggest some further upside to the project’s contract value and scope of works.

  • In a related development, Bernama also reported that design works for both the Ampang and Kelana Jaya LRT line extensions have almost been completed. Our own channel checks also reveal that acquisition of major tracts of land gazetted for the Kelana line LRT extension corridor has also been completed. Further out, construction works are scheduled to commence from the middle of this year ahead of its completion within three years. This is in line with our earlier expectations that major awards for the line extension works could be dolled-out within the next one to quarter quarters.

  • Taken together, latest developments validate our earlier views that progress on the two major LRT jobs are gathering momentum. Going by track record, we believe the UEM group, Gamuda Bhd (Gamuda) and IJM Corp Bhd (IJM) are among front-runners for the LRT jobs. We maintain our OVERWEIGHT stance on the construction sector – and expect a reacceleration of contract flows ahead of the 10th Malaysia Plan being unveiled in June – on top of a recovery in construction margins and gradual revitalisation of order flows abroad, notably in India, the Middle East and Vietnam. For exposure to the sector, we continue to like IJM, Gamuda, WCT, Naim Holdings Bhd and Hock Seng Lee.