Reiterate Overweight on the construction and property sectors.
Source: Maybank IB Research
We came away from a meeting with Gamuda’s Group Managing
Director Dato’ Lin Yun Ling feeling upbeat, as the approval for KVMRT
2 is on track and local contractors will benefit from the replenishment of
their order books post KVMRT I. We maintain our Overweight call on
the construction sector with our top BUYs being Gamuda, IJM Corp,
WCT and Sunway. The final alignment of KVMRT 2 will likely create
another buying spree for properties close to the new MRT stations. Key
beneficiaries include SP Setia, YTL Land, UEML and IOI Prop.
KVMRT on high-priority list.
Dato’ Lin believes that the government is
highly committed to implementing KVMRT 2 & 3, as the socioeconomic
benefits that could be reaped from the KVMRT far outweigh its costs as
compared to the government’s other development plans. In addition,
the radial line (KVMRT 2) connecting Sg Buloh and Serdang will take
precedence over the Circle Line (KVMRT 3). KVMRT 2 is expected to
have the highest ridership compared to KVMRT 1 & 3 and other LRT
lines, as it will serve densely populated, lower-income neighbourhoods
including Damansara Damai, Kepong, Kg. Pandan, Batu, and Serdang.
Follow the MRT lines to the next boom areas.
While we are surprised by the delay in the Circle Line (probably to 2015) which has
the important function of integrating the currently disjointed LRT and
monorail lines, the second MRT line (Sg Buloh-Serdang-Putrajaya) will
likely set off another buying spree of properties located close to the new
MRT stations. Key beneficiaries include 1MDB’s Tun Razak Exchange
project, SP Setia (Selayang), YTL Land (Sentul), UEML (exAngkasaraya) and IOI Corp (via IOI Prop; Putrajaya).
Approval is on track.
SPAD has completed the detailed studies on
KVMRT 2, which are ready to be tabled to the cabinet. Dato’ Lin
expects approvals to come through by Jul 2013 at the earliest, because
it is essential that the civil works of KVMRT 2 begin right after civil
works on KVMRT 1 are completed in mid-2015. Hence, the government
needs to approve KVMRT 2 by Jul 2013 since land acquisitions, public
feedback on the alignment and tendering would take up to two years.
KVMRT 2 and 3 should be completed by 2020 and 2021 respectively.