KUCHING: Gamuda Bhd (Gamuda) is one of the short-listed bidders for the RM27 billion Penang Integrated Transport Masterplan (PITM) project and analysts believe its prospects are good to clinch the contract.
Affin Hwang Investment Bank Bhd’s research arm (AffinHwang Capital) said, “We gather that Gamuda is one of two shortlisted bidders for the PITM project out of the six initial bidders, based on our market research.
“We believe prospects are good for Gamuda to clinch the project-delivery-partner (PDP) contract given its strong track record in undertaking large-scale infrastructure projects.
“Assuming RM12.4 billion share of works over FY18-32, seven per cent discount rate and six per cent PDP fee rate, we estimate the project DCF value is RM0.12 per share,” it said.
The PITM project is a long-term plan to improve the public transportation system, road network in Penang, and linkages between the island and mainland at an estimated total cost of RM27 billion.
It involves the development of an undersea tunnel linking Penang island to the mainland and three highways, a new Light Rail Transit (LRT) system and tram lines, improving the bus and ferry services, upgrading the road network and building a transportation hub.
Consortium Zenith BUCG Sdn Bhd (ZBUCG) was awarded the RM6.3 billion contract for the undersea tunnel and three highways in October 2013.
As the payment-in-kind for the PITM project is in the form of land reclamation rights, the PDP will need to have a strong balance sheet, property development and project financing expertise to undertake the project.
Gamuda has extensive experience in these areas as an integrated construction, infrastructure and property development company with moderate net gearing of 40 per cent and strong support from banks.
The joint venture (JV) between MMC Corp (MMC MK, RM2.60) and Gamuda was appointed the PDP for the RM25 billion MRT Line 2 project in October 2014 and an agreement finalizing the PDP terms is expected to be signed in June 2015.
The outstanding construction order book of RM1.6 billion and PDP order book of RM12.2 billion should last until 2022.
The MMC-Gamuda JV was appointed the PDP for the RM28 billion MRT Line 2 project in October 2014 and an agreement finalizing the PDP terms is expected to be signed in June 2015.
MRT Corp, the government-owned project owner, revised the construction cost estimate from RM23 billion to RM28 billion, benefiting the JV as we understand that the PDP fee is based on six per cent of the total construction cost.
The JV has competitive advantages to clinch the MRT2 underground works contract when the tender is called in 4Q15 and awarded in mid-2016 onwards.
The MRT2 project should improve Gamuda’s long-term earnings visibility.
Its outstanding construction order book of RM1.6 billion and PDP order book of RM12.2 billion will likely last until 2022.
Gamuda has cut its property pre-sales target to RM1.2 billion from RM1.6 billion for FY15E as tight bank lending for mortgages and weak market sentiment have adversely affected property demand, especially in Johor.