This article first appeared in The Edge Malaysia Weekly, on November 2 - November 8, 2015.

THE federal government’s plan to build the 197km double-tracking railway line linking Gemas to Johor Baru has a proposed alignment with 11 stations and an additional three to be built later, according to a Notice for Public Inspection released last week.

Current plans are for the railway line to run through Segamat, Genuang, Labis, Bekok, Paloh, Kluang, Mengkibol, Renggam, Layang-Layang, Kulai and Kempas Baru. In addition, there are three future stations — in Senai, Chamek and Tenang — but so far, there is no indication when they will be built.

An interesting facet of the proposed project is that the station in Johor Baru is elevated.

“This increases costs, but then again, it’s best to get it over and done with. It has been in the pipeline for many years,” says a construction industry veteran.

In January 2011, then transport minister Datuk Seri Kong Cho Ha (now Tan Sri) said the government had appointed two consultants to study the Gemas-Johor Baru railway line and was negotiating with Chinese consortiums, which would be appointed later that year, to do the job.

And details are being finalised now — four years down the road.

In a nutshell, the project involves the construction of an electrified double-track line between Gemas and Johor Baru for trains to ply at a speed of 160kph and the building of new stations. It also involves the mediation and integration of the signalling, electrification and communications systems and overhead lines with the existing system from Seremban to Gemas while the operational controls are located in KL Sentral and Gemas.

Interestingly enough, the construction of the tracks will also involve the acquisition of more than 300ha of land — more than 220ha from private entities and about 80ha currently under the purview of the federal government, namely road, river and forest reserves, quarries and graveyards, among others.

Documents sighted by The Edge indicate that several large parcels of land will be acquired from several parties, including about 40ha from Mahamurni Plantations Sdn Bhd and The Kulim Group Ltd — both units of Kulim (M) Bhd, which in turn is controlled by Johor Corp Bhd, the southern-most state’s investment arm — 37.5ha from Sime Darby Bhd and its units, close to 15ha from IOI Corp Bhd and 11ha from Kuala Lumpur Kepong Bhd. An interesting name that popped up is Achi Jaya Plantations Sdn Bhd (1.8ha), a company linked to the family of Sarawak Yang di-Pertua Negeri Tun Abdul Taib Mahmud.

While details such as the cost of the railway line were not disclosed, construction industry players suggest a price tag of about RM8 billion.

CRCC and Fajarbaru

The Edge understands that a Chinese consortium, led by China Railway Construction Corp Ltd (CRCC), has offered to partially fund the construction of the railway line, and is likely to bag the contract with a Malaysian partner.

While there has been no formal announcement of the partner, Fajarbaru Builder Group Bhd has been touted to be the chosen one.

When contacted by The Edge Financial Daily, Fajarbaru (fundamental: 1.15; valuation: 1.80) executives did not deny being interested in the project, but said nothing more, as it is a publicly traded company.

Many in the industry, however, believe that Fajarbaru and CRCC are in talks and could conclude a deal soon.

It is noteworthy that no tender has been called to build the railway line. Only the Notice for Public Inspection was released last week. All parties opposed to the project are to make clear their grouses by the end of January next year.

This is not the first time CRCC has been linked to this major rail job.

A couple of years ago, news reports had it that CRCC, partnering Tan Sri Lim Kang Hoo — who controls 32% of Ekovest Bhd, an engineering and construction outfit — was one of three Chinese companies interested in the job. The other two were China Railway Engineering Corp (CREC) and China Communications Construction Co (CCCC), each tied up with local companies.

CREC was said to be partnering prominent businessmen Tan Sri Desmond Lim Siew Choon, who controls Malton Bhd, and Pavilion Real Estate Investment Trust, among others, while CCCC partnered Tan Sri Tan Kay Hock, who has a 42.2% stake in George Kent (M) Bhd and also controls slightly less than 44% of Johan Holdings Bhd.

All three individuals are very well connected, which added to the difficulty in awarding the large-scale contract, 

sources familiar with the matter say.

The delay, however, has been a lot more than four years. In the late 1990s, China and India were slated to undertake the development of the entire double-tracking project, stretching from Padang Besar to Johor Baru, estimated to cost more than RM40 billion back then. Payment for the construction of the tracks was to be via crude palm oil.

However, in late 2003, a consortium, made up of businessman Tan Sri Syed Mokhtar Albukhary’s MMC Corp Bhd and construction giant Gamuda Bhd, bagged the railway job at a price tag of RM14.3 billion.

Under Tun Abdullah Ahmad Badawi’s premiership, however, the project was initially scraped, but revived in 2007 with the MMC-Gamuda consortium being given the mandate to build the stretch from Ipoh to Padang Besar for RM12.5 billion, while Indian Railway Construction was given the Seremban-Gemas stretch for RM3.5 billion.

Considering CRCC is ranked No 79 on Fortune’s Global 500 list of companies based on revenue and a state-controlled entity, funding the Gemas-Johor Baru railway line is unlikely to pose a problem.

For its financial year ended June 30, 2015, Fajarbaru suffered a net loss of RM2.6 million on revenue of RM387.5 million.

As at end-June, Fajarbaru had cash and bank balances of RM56 million, long-term debt commitments of RM33.3 million and short-term borrowings of RM16.5 million.

At its close of 49 sen last Thursday, the company had a market capitalisation of RM161.2 million.

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