Following our coverage of Malaysia’s people-centric Budget 2018, we look at the most obvious theme: construction.

With mega infrastructure projects (valued at RM210B) focused on public transport infrastructure, rail companies, contractors and building material players are set to benefit.

Here are two stocks worth considering when the mega infrastructure projects in Malaysia start to materialise.

1. Gamuda: banking on experience in building MRT 1 & MRT 2


Maybank Kim Eng Research (MBKE) notes that a tender notice for the Klang Valley MRT 3 – Circle Line turnkey contractor role has been announced by MRT Corp.

We can hence expect a significant change in the project delivery partner (PDP) structure used in both the previous Klang Valley MRT 1 and 2.

MRT 3 project: Switching from PDP model to turnkey contractor model

The Notice of Tender was for the turnkey contractor role. The turnkey contractor will be in-charge of almost all aspects of the works for the Klang Valley MRT 3 – Circle Line.

Unlike the previous PDP model, the turnkey contractor would also need to provide financing for the project, over a minimum 30 years.

Gamuda’s experience puts it in prime position for KVMRT 3

Based on MBKE’s estimated project cost between RM40-45 billion, MBKE believes that no single Malaysian contractor would be able to provide the massive financing.

As such, the turnkey role could be undertaken in consortiums with international contractors.

However, despite the absence of the PDP model in MRT 3, CIMB Research expects Gamuda to potentially play a significant role in the construction of the MRT 3 line.

Given its cost and logistics advantage and expertise in the geological settings of Klang Valley via MRT 1 and MRT 2, CIMB Research looks at Gamuda as a significant beneficiary.

CIMB Research: Gamuda Berhad (KLSE: GAMUDA) – BUY; RM6.15

2. IJM Corp: Thick Orderbook Strengthens Its Execution Story

Orderbook growing steadily

IJM Corp has been on a winning streak of securing construction jobs lately.

IJM Construction S/B (a 100% subsidiary of IJM Corp) recently accepted a project to undertake the design, construction and completion of HSBC’s office building for RM392 million.

The construction period is 37.5 months and the expected hand-over to HSBC is by Dec 2020.

This latest construction job win positively lifts its outstanding orderbook to above RM9 billion and further enhances medium-term earnings visibility and strengthens IJM’s execution story.

More orderbook wins in waiting

In the previous MRT projects (MRT 1 and MRT 2), IJM Corp provided construction services to both projects.

IJM Corp’s exposure to Klang Valley MRT 2 will continue to report relatively stronger earnings as work progress accelerates from the second half of 2017.

Given its exposure to Klang Valley MRT 1 and MRT 2, IJM Corp would have a major advantage in bidding for the 8km above ground scope and seven above-ground stations of Klang Valley MRT 3.


On top of the MRT 3 project, further projects like Klang Valley Light Railway Transit (KVLRT) 3, Gemas-Johor Baru double tracking, ECRL (East Coast Rail Line) and the Pan Borneo Sabah Highway could be clinched by IJM Corp to increase its order book.

CIMB Research: IJM Corporation Berhad (KLSE: IJM) – BUY; RM3.87

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