Potential winners if project comes through

ANALYSTS share the sentiment of Klang Valley city dwellers in hoping for the Mass Rapid Transit 3 (MRT3) project to proceed but remain cautious about its execution.

CIMB Securities senior analyst Mak Hoy Ken notes that the project’s feasibility depends on securing land acquisition and finalising the funding structure.

He also suggests that a clearer outlook may emerge after the government irons out details of its rationalisation programme, following the recent delay in implementing the RON95 targeted subsidies.

Mak adds that it remains uncertain whether a re-tendering process will occur.

However, he suggests that Gamuda Bhd is likely to maintain a strong position in tunnelling-related projects, given its role as the incumbent tunneling contractor for the first two MRT lines.

He also anticipates intense competition for civil work packages, while systems-related works may see the formation of multiple local-foreign consortia, similar to the Penang Light Rail Transit project.

Mak projects Econpile Holdings Bhd as a leading contender for piling-related work.

Meanwhile, building materials companies such as Malayan Cement Bhd and Ann Joo Resources Bhd offer alternative exposure through long-term supply contracts for cement and steel, respectively.

Vincent Lau, head of equity sales at Rakuten Trade, considers the MRT3 project as the “final piece in the jigsaw” of transit lines in the Klang Valley.

He describes the “Circle Line” as an efficient loop connecting MRT1 and MRT2.

He says the MRT3 would be well placed to serve people in Kuala Lumpur and Petaling Jaya, mitigating traffic congestion. He remains unperturbed by the financing of the project.

The government’s announcement this week of a delay in implementing RON95 targeted subsidies does not seem to hinder its ability to finance the project.

This is particularly true if oil prices remain stable and the new taxes provide additional revenue.

Recent checks suggest that the government has shifted from the initially proposed hybrid financing model for the MRT3 project to debt issuances by DanaInfra Nasional Bhd.

Additionally, the project’s cost estimates have been reduced from RM68bil to RM45bil.

The MRT3 project is expected to provide a significant boost to the construction sector, which has a strong multiplier effect on the economy.

This could allow the government to use the project as a tool to stimulate economic growth.

According to Lau, companies like Gamuda and IJM are likely to benefit, but the positive impact could extend to building materials and processes companies such as Fibromat (M) Bhd and Southern Steel Bhd, as well as contractors and even the food and beverage industry.

Lau believes that the MRT3 will not significantly impact real estate in the Klang Valley.

Instead, he sees greater potential for growth in Johor, driven by the Johor-Singapore Special Economic Zone and the Johor Baru-Singapore Rapid Transit System Link.

Based on track records in the MRT1 and MRT2 projects, RHB Research analyst Adam Mohamed Rahim points out constructors such as Gamuda, Sunway Construction Group Bhd, IJM, Malaysian Resources Corp Bhd, WCT Holdings Bhd, Gadang Holdings Bhd and Mudajaya Group Bhd are expected to be the first-liner beneficiaries as main contractors.

Builders such as Econpile, Gabungan AQRS Bhd, Kimlun Corp Bhd and TRC Synergy Bhd could play a role as sub-contractors.

“We anticipate that some details about MRT3 will be revealed during the tabling of either the 13th Malaysia Plan on July 31 or Budget 2026 on Oct 10.

“These details are expected to include the funding mechanism, the latest estimated cost, and whether a new round of re-tendering will be necessary,” he says.

Adam has a host of construction players on his “buy” call list, including the usual suspects –Gamuda, Sunway Construction, IJM, Econpile and Gabungan, with respective target prices (TP) of RM5.86, RM6.80, RM3.30, RM4.80 and 33 sen.

He includes Binastra Corp Bhd as one of his top picks, with a TP of RM2.64.

Apex Securities analyst Tan Sue Wen believes the MRT3 could spark the next growth phase for Southern Cable Group Bhd, pointing out that the cable manufacturer is well-positioned to capture a significant portion of the project’s cable supply package, leveraging its strong MRT2 track record, comprehensive product offerings and market leadership.

Assuming a cable supply package value of RM600mil for the MRT3, she projects a 60% market share. A blended gross profit margin of 15% means the project could contribute RM54mil in gross profit to Southern Cable, or 25% of her forecast for the group for the financial year ending December 2025.

“This would be a meaningful lift to earnings visibility over the medium term,” she says.

Southern Cable’s growth is now limited by capacity rather than demand, as surging demand from national infrastructure projects, data centre investments, and energy transition initiatives has made capacity expansion the primary bottleneck, she adds.

She says there may be further upside to Southern Cable’s current capacity expansion plan, which targets production capacity growth of 20% to approximately 60,000km per year within the next two years.

“A more aggressive capital expenditure rollout could position the group to capture even larger volumes.

“This implies further upside to our earnings forecasts, which we have revised upwards by 9.5% and 18.5% for FY26 and FY37 respectively, given the expected rollout of MRT3 and other mega infrastructure projects such as the Penang Light Rail Transit,” says Tan.

Her “buy” call on the stock comes with a TP of RM2.14, implying an upside of 31.3% based on the counter’s price of RM1.63 at the time of writing.