As PDP for LRT3, they are on track for higher order books
PETALING JAYA: The appointment of Malaysian Resources Corp Bhd (MRCB) and George Kent (M) Bhd as project delivery partner (PDP) for the RM9bil light rail transit three (LRT3) will see both companies receiving a significant boost to their respective order books.
As PDP, both companies will earn a management fee of 3% each.
Based on a this fee structure, UOBKayHian said in a report yesterday that MRCB’s stake could contribute RM270mil in pre-tax profit over five years from groundbreaking.
The research house added that the project would boost George Kent’s construction orderbook by RM4.5bil.
“Current outstanding orderbook for this project is about RM1.3bil, but including the newly awarded PDP role for LRT3, George Kent’s outstanding orderbook would balloon to RM5.8bil.”
MRCB shares shed one sen to close at 99 sen yesterday, while George Kent ended the day one sen higher at RM1.40.
Shares of both stocks have been on the rise since the start of the month. Both MRCB and George Kent shares jumped 20% and 25% to close at RM1 and RM1.39 respectively on Friday.
A broker said the spike in both company’s share prices was because many investors had expected MRCB and George Kent to bag the project.
“There had been a lot of talk and speculation by investors that MRCB and George Kent were the frontrunners to be appointed the PDP for the LRT3 line,” he said.
AmResearch, in a report earlier this year, had said that they favoured MRCB and George Kent.
“Of the bidders, our view of the MRCB-George Kent JV as a frontrunner remains.”
Meanwhile, Kenanga Research in a report yesterday said it was surprised with the appointment of MRCB as the PDP for the LRT3 line. “We were positively surprised that MRCB landed the PDP role for LRT3 as we did not expect them to bag the role given the fierce competition from the other two competitors, namely the Naza Group/China-based CSR Zhuzhou joint venture (JV) and UEM Group.
“We believe that being the PDP for LRT3, which is worth RM9bil, will enable MRCB to secure more contract flows from LRT3 in the near-to-mid-term, which will further boost its existing orderbook of around RM1.7bil.”
Additionally, Kenanga said the PDP role would easily add RM54mil per annum to the group’s bottom line, assuming a clean 6% PDP fee from Prasarana.”
MIDF Research said it was positive on the award of the contract, as it exceeds the research house’s replenishment target for engineering and construction job.
“We are maintaining an upbeat outlook for MRCB due to government policy that encourages transit-oriented development, which is backed by the ever expanding mass transit and light rail network infrastructure for Greater Kuala Lumpur,” it said.
Six JVs and individual companies were in the running for the LRT3 project. They were the JV between Gamuda Bhd and MMC Corp Bhd, the MRCB-George Kent JV, UEM Group Bhd, Naza Group and China-based partner CSR Zhuzhou Electric Locomotive Co Ltd, Sunway Bhd, as well as WCT Bhd and AlloyMtd group.
Construction work on the 36km LRT3 line will begin in early 2016 and is expected to be completed by Aug 31, 2020.
The LRT3 line is the biggest project by development value to date for Prasarana that is now overseeing the RM7bil Kelana Jaya and Ampang Lines LRT extension project.
