At a press conference yesterday, SPNB announced the details on the LRT extension, whereby the Kelana and Ampang lines will be extended by 17km and 17.7km respectively. Prequalification tenders are expected to be called next month and actual award maybe in early 2010, with the construction period estimated at 3 years. We see 4 main potential beneficiaries of the LRT extension job - UEM Builders, Gamuda, IJM and MRCB - by virtue of their experience in such jobs. We take this recent development as a prelude to a tide of positive news for the sector. Our rating on the sector has been upgraded from Neutral to OVERWEIGHT.
Potential beneficiaries. We see 4 potential beneficiaries of the LRT extension: UEM Builders (Not Listed), Gamuda (SELL, TP: RM2.94), IJM (NEUTRAL, TP: RM6.21) and MRCB (TRADING BUY, TP: RM1.69). We reckon that Gamuda has the necessary expertise to undertake the job given its experience with the Kaohsiung Mass Rapid Transit (MRT) in Taiwan. IJM and Road Builders (acquired by IJM in 2007) were one of the main subcontractors for the existing LRT line. On the other hand, MRCB was involved in the existing LRT portion at KL Sentral. Lastly, UEM Builders was the main contractor for the existing line. Another potential beneficiary is Mudajaya (BUY, TP: RM4.80) which previously constructed some of the existing LRT stations. It also built the ERL link at KLIA.
Upgrade to OVERWEIGHT. We take this latest development as a prelude to more positive news for the sector. Expectations of the awarding of more projects should keep contractors in the limelight, in our view. As such, we are upgrading our sector rating from Neutral to OVERWEIGHT. For those concerned over the lofty valuations, we suggest a switch to smaller cap contractors. Our top sector picks are Mudajaya and WCT (BUY, TP: RM3.12). We also like Naim Holdings (BUY, TP: RM3.46) for Sarawak
related plays.
Upgrade to OVERWEIGHT. We take this latest development as a prelude to more positive news for the sector. Expectations of the awarding of more projects should keep contractors in the limelight, in our view. As such, we are upgrading our sector rating from Neutral to OVERWEIGHT. For those concerned over the lofty valuations, we suggest a switch to smaller cap contractors. Our top sector picks are Mudajaya and WCT (BUY, TP: RM3.12). We also like Naim Holdings (BUY, TP: RM3.46) for Sarawak
related plays.