Construction sector. 
Maintain Overweight. For the first time, a news article has featured details of the Land Public Transport Commission’s (Spad) plans for the Bus Rapid Transit (BRT) project. The estimated value of RM18 billion for the 12 BRT routes was a positive surprise. The BRT project is in line with the government’s plans to upgrade public transport. 

Based on the average RM84 million cost per kilometre benchmarked for the ongoing BRT Sunway line, the cost of the entire 215km of the BRT network works out to a whopping RM18 billion. This was the main positive surprise. 

The other piece of good news is that the Spad is rolling out four new BRT lines which are of high priority. We believe the pre-qualification or tenders could start at end of the second half of 2015 (2H15) and could be more relevant to smaller or medium-sized pure contractors at this juncture. 

The funding and project structure have also yet to be revealed, but the article alluded to the fact that there could be more news flow from the Spad in the coming months, which would be overall positive for the construction sector. It is also positive for the property sector given the spillover effects on land values, as was the case for the mass rapid transit (MRT) project.

We believe that Sunway could turn out to be among the big beneficiaries of the BRT project. The group’s pure construction arm, Sunway Construction Sdn Bhd, was the first and only player to be awarded the RM454 million pilot project in 2013. 

The BRT Sunway line was 72% completed as at end-2014. Our RM2 billion new order book assumption for Sunway in financial year 2015 excludes new potential in the BRT project. — CIMB Research, March 16

This article first appeared in The Edge Financial Daily, on March 17, 2015.