This article first appeared in The Edge Malaysia Weekly on September 26, 2022 - October 2, 2022

MALAYSIAN Resources Corp Bhd (MRCB) could receive a further boost in undertaking the Light Rail Transit 3 (LRT3) project as the federal government is now contemplating whether five provisional stations — previously axed — should be reinstated as per the original blueprint.

Spanning 37km, the LRT3 is planned to connect 1 Utama Shopping Centre in Damansara Utama to Johan Setia in Klang, with an initial 26 stations planned.

However, the construction of five stations — at Tropicana, Temasya, Raja Muda, Bukit Raja and Bandar Botanic — was deferred in mid-July 2018 after the Pakatan Harapan government, which had just come to power, slashed costs by almost half (47%), or from RM31.65 billion to RM16.63 billion, as part of an austerity drive.

Later in the year, MRCB announced that the fixed-price contract for the LRT3 was RM11.4 billion.

However, at a press conference last Thursday, Transport Minister Datuk Seri Wee Ka Siong said, “The previous government had dropped several stations on the LRT 3 route … now is the right time for us to decide if the stations that were dropped, should be reconsidered. I have spoken to the finance minister (Datuk Seri Tengku Zafrul Abdul Aziz) and we will evaluate it,” he said.

Once a decision has been firmed up, MRCB, which was given the mandate to construct the LRT3 line and stations, stands in good stead to be awarded the additional contract, provided that Prasarana Malaysia Bhd agrees. Prasarana is the owner-operator of rail services, including the LRT networks, KL Monorail, Mass Rapid Transit or MRT lines, and the Rapid bus services in Kuala Lumpur, Selangor, Penang and Pahang.

While the estimates to construct the five stations are not known, an analyst from a local bank-backed brokerage says that depending on the specifications, each station could cost anywhere between RM150 million and RM200 million, or a total of RM750 million to RM1 billion for the five.

In 2015, MRCB and its former partner, George Kent (M) Bhd, were awarded the project delivery partner (PDP) role to construct the LRT3 by Prasarana, with an initial budget of RM9 billion for construction works and RM1 billion for land acquisition.

However, for various reasons, the cost escalated to a hefty RM31.5 billion, which was quickly slashed by the Pakatan Harapan coalition when it took over the federal government after the 14th general election in May 2018.

The move to axe the five stations then was mainly to cut costs and reduce government debt. But given Putrajaya’s target for 40% of the population to use public transport by 2030, from the current 25%, perhaps the strategies have to be relooked.

In a nutshell, while the stations that were dropped may not attract many passengers now, things could change with more people utilising public transport.

According to LRT3’s website, as at end-June this year, overall line-wide progress was at 74.04%, with the project — estimated to connect two million people between Damansara Utama and Klang — slated for completion in early 2024.

For MRCB, the additional work is expected to have a positive impact on its bottom line. For the six months ended June, the group chalked up a net profit of RM28.14 million on the back of RM1.51 billion in revenue. For the corresponding period a year ago, it suffered a net loss of RM27.21 million from RM452.46 million in turnover.

In notes accompanying its financials, MRCB attributed the improved revenue to the consolidation and construction progress of the LRT3 project company that it now wholly owns.

As at end-June this year, MRCB had deposits, cash and bank balances of RM583.84 million, while on the other side of the balance sheet, it had long-term borrowings of RM1.46 billion and short-term debt commitments of RM574.3 million.

MRCB’s finance costs for the six months ended June was RM47.66 million, with its retained earnings pegged at RM146.25 million.

In its annual report for FY2021, MRCB stated that it had a strong pipeline of property projects with a GDV of RM33 billion across 1,008 acres, and unrecognised future revenue (unbilled sales) worth RM923 million. Its long-term external client construction order book was at RM27.3 billion.

Apart from the LRT3, some of MRCB’s key construction projects include Bukit Jalil Sentral — a RM10.12 billion development scheduled to conclude in 2038, which will have a residential and commercial development, office towers, hotels, retail shops and a mall, among others.

The group is also involved in the RM3 billion Kwasa Utama, which will include the Kwasa Corporate Park — a 29.82-acre mixed-use development project on which the Employees Provident Fund’s (EPF) headquarters will be located, apart from financial institutions, office and commercial buildings, a retail mall, serviced apartments and a hotel.

The group’s largest shareholder is the EPF with a 36.21% stake, followed by MRCB executive vice-chairman Tan Sri Mohamad Salim Fateh Din, who has a shareholding of 15.48% via his flagship Gapurna Sdn Bhd, while pilgrim fund Lembaga Tabung Haji owns 5.71%.

Last Thursday, MRCB shares closed at 32.5 sen, which translates into a market capitalisation of RM1.43 billion.

Note: The article has been amended for accuracy. 

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