KUCHING: Gamuda Bhd’s (Gamuda) joint-venture with MMC Corporation Bhd (MMC) remains the front runner for the tunnelling works of the Sungai Buloh-Kajang (SBK) line of the Klang Valley Mass Rapid Transit (MRT) project despite the impasse in resolving the land acquisition issue.

According to ECM Libra Capital Sdn Bhd (ECM Libra) in its research report, “A group of 20 landowners affected by the SBK underground rail alignment along Jalan Sultan and Jalan Bukit Bintang are petitioning to the Prime Minister to look into a possible realignment of the route to bypass their properties.”

It believed that there were risks that the impasse might drag on and hold up the awarding of the 19 SBK MRT line elevated and underground packages worth RM20 billion scheduled from the first quarter of next year.  Though the tunnelling package award eyed by the Gamuda-MMC joint venture was unlikely to be delayed seeing that the tunnel boring machines used were only expected to reach the sites by 2014.

The Gamuda-MMC joint venture remained in a good position to clinch the award as it had price advantage under the Swiss challenge, being allowed to place a final bid up to 7.5 per cent higher than the fair price. It also had the right to match the fair price after the initial competitive bids, the research report added.

ECM Libra marked Chinese contractors as the top competitors for the local joint venture, citing their engineering expertise and ability to source machinery and equipment at almost half the cost of those that Gamuda-MMC intended to utilise.

“However, it is likely that the government will award the job to Gamuda-MMC to optimise job creation and the multiplier effect of the MRT project to the Malaysian economy as outlined in the Economic Transformation Programme unveiled last year,” it explained.

At this juncture, Gamuda was also said to be eyeing the Gemas-Johor Bahru electrified double-tracking project (EDTP) which the government might call for tender early next year. ECM Libra informed that this final stretch of the EDTP linking the Peninsular with Singapore and Thailand was worth about RM8 billion and was scheduled to be completed by 2016.

While the Prime Minister had previously agreed in principle to award the main contract of the EDTP to China-based contractors when the country’s Premier visited in April. Gamuda intended to participate by teaming up with the Chinese contractor as a JV partner or a subcontractor.

“On the property development front, Gamuda plans to launch the first phase of Gamuda City Hanoi by 2011 despite the poor take-up rate of 20 per cent for the recently launched Celadon City in Ho Chi Minh City,” ECM Libra pointed out.

Taking into account the factors, ECM Libra pegged a target price of RM2.94 per share for Gamuda, anticipating potential headwinds from external economic uncertainties and project implementation risks.