Pan Borneo Highway-linked counters fall


Shares of construction companies linked to the Pan Borneo Highway (PBH) project saw a decline, following the government’s announcement to take over the initiative by replacing the project delivery partner (PDP) arrangement with a turnkey contractor model.

At closing time, MMC Corp Bhd — which owns a stake in the PDP for the Sabah portion alongside UEM Group and Warisan Tarang Construction Sdn Bhd — decreased 0.94% to RM1.05.

The Sarawak portion is linked to controversial businessman Tan Sri Bustari Yusuf, whose flagship company Petra Energy Bhd owns a stake in Shorefield Resources Sdn Bhd.

Petra Energy dipped 1.94% to RM1.01, and swung between an intraday high of RM1.05 to a low of RM1 yesterday.

MIDF Amanah Investment Bank Bhd analyst Adam M Rahim said assuming UEM and MMC Corp are able to reduce costs, the outcome for them will be positive, and the possibility of the duo participating in the re-tendering process is not ruled out.

“This is taking into consideration the joint-venture company’s initial involvement in the project and the competitive cost advantage it is able to achieve, in comparison to potential tender bids by other contractors,” he told The Malaysian Reserve.

He said while the possibility of MMC Corp being no longer involved in PBH poses a risk on earnings, the company is actively bidding for a few large-scale infrastructure projects which could act as a buffer for its construction orderbook.

“The target is one to two projects a year with an individual value ranging from RM250 million to RM500 million. It is also notable that the estimated orderbook of RM9.5 billion under the absence of PBH is five times the construction revenue in FY18 (the 2018 financial year),” he said.

If MMC Corp does not end up being re-appointed as the contractor under the turnkey model, its construction orderbook will decline from RM11 billion as of Dec 31, 2018, to around RM9.5 billion.

It was reported yesterday that the federal government has decided to ditch the PDP model for the entire RM29 billion PBH project.

For the remaining 5,324km of PBH, turnkey contractors will be hired to replace the PDP to complete it.

Currently, it is unclear if the existing PDPs for the project will be shortlisted by the government as candidates for the new model.

Market talks also indicated that Sabah’s Infrastructure Development Ministry had submitted a proposal to take over the project implementation for the Sabah portion.

The Sabah side of the highway spans 706km and is divided into 35 work packages, while the Sarawak portion spans 1,060km with 11 project packages already handed over to contractors.

The Sabah and Sarawak portions are slated for completion in 2023 and 2021 respectively.

Earlier this month, Deputy Works Minister Mohd Anuar Mohd Tahir was reported as saying the Sabah portion reached 12.4% completion with RM609 million spent as of February.