Local JV still has edge in MRT project, says OSK

KUALA LUMPUR: The local joint venture still has an edge in the Mass Rapid Transit (MRT) project despite four foreign parties prequalified for the tunneling works of the Sungai Buloh-Kajang MRT line, says OSK Research.

The five are the Gamuda-MMC joint venture, which is the only local party, China's Sinohydro Group, South Korea's SK Holdings and two other companies from Japan and China.

In a research note on Friday, Oct 21, OSK Research said as the MRT is funded by the government, it would like to keep the MRT job largely in the hands of local contractors.

Furthermore, the government had also previously stated that under the Economic Transformation Programme, the awarding of contracts to foreigners would also depend on whether it would bring a positive impact on the gross national income.

"As understanding soil conditions is crucial in pricing a bid, we believe the joint venture scores on this front, having completed the Smart Tunnel and being the party that initially mooted the idea for the MRT.

"Without a sound grasp on local soil conditions, foreign contractors may build higher buffers into their bids. Finally, the government may consider a pricing advantage for local contractors," OSK Research said.

It was reported that the pricing advantage could be some 7.5% as the joint venture is 50% Bumiputra-owned.

It means that foreign contractors' bids must be at least 7.5% lower than the joint venture's in order to clinch the job.

OSK Research said the RM7 billion-RM8 billion MRT tunneling portion should be awarded after the V5 and V6 elevated works are dished out some time in January or February.

"With tender documents due to be out today, we expect an award to be made by end of first quarter next year," it added.

OSK Research has maintained a buy call on the construction sector.

HwangDBS Vickers Research said for the broader construction sector, the news provides some assurance that the timeline of the contract is still largely intact.

"Some awards have already materialised for the elevated works and we expect a formal award for the tunneling portion by end first quarter next year," it added. — Bernama