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CONSTRUCTION08 March 2016

Penang undersea tunnel project kickoff in June

Sector report OVERWEIGHT

Mak Hoy Ken

mak-hoy-ken@ambankgroup.com

03-2036 2294

(Maintained)

Rationale for report : Sector upd ate

  NST reported today that the Penang undersea tunnel and road initiatives wouldcommence in June.

  The project involves a 7.2km-long undersea tunnel linking Penang Island to theisland state’s mainland. It will also involve 3 expressways.

  The mega project will kick off with the construction of the three expressways,starting with the Air Itam-Tun Dr. Lim Chong Eu Expressway bypass.

  This would be followed by the Jln Tg.Bungah to Teluk Bahang paired-road when theAir Itam-Tun Dr. Lim Chong Eu Expressway reaches the mid-point.

  The construction of the third road  – from Gurney Drive to Tun Dr. Lim Chong Eu  – will commence when the first two expressways are completed. The former will be

undertaken as a standalone project as more complex work needs to be carried out.

  Meanwhile, we understand that the undersea tunnel will only commence either in2020 or 2021.

  Taken together, the three roads have a combined length of approximately 21km. Thebudgeted amount is c.RM2bil, including RM500mil that will be reimbursed to the

Penang government for land acquisition cost.

  Recall that Consortium Zenith BUCG Sdn Bhd (CZBUCG) had earlier been appointedas main contractor for the RM6.3bil project under an award back in October 2013. Inexchange for the project, the Penang government is to compensate CZBUCG with

c.44.5 ha (~110 acres) of reclaimed land in Tg.Pinang.

  CZBUCG is 98.1%-owned by Zenith Construction Sdn Bhd. The remainingshareholders are Juteras Sdn Bhd (1.89%) and Beijing Urban Construction Group Co

Ltd (0.01%). The consortium will partner Beijing-based China Railway Construction

Corp Ltd for the undersea tunnel.

  The commencement of the Penang Undersea Tunnel and road project augurs wellfor infrastructure projects in Penang. More importantly, its approval will provide the

impetus for the overarching Penang Transport Master Plan (PTMP), for which the

Gamuda-led consortium had earlier been appointed as the Project Delivery Partner

(PDP).

  While Gamuda is a clear winner should the PTMP project get the green light, weenvisage some sub-contracting opportunities for other Malaysian contractors once

all these mega Penang infrastructure initiatives take off the ground. Likewise, there

will be scope for suppliers of building materials, i.e. Lafarge Malaysia and Ann Joo

Resources to benefit.

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AmInvestment Bank Bhd (23742-V) (A member of the AmBank Group)1 5 t h F l o o r B a n g u n a n A m B a n k G r o u p55 Jalan Raja Chulan50200 Kuala LumpurTel: ( 03)2070-2 444 ( r esearch)F a x : ( 0 3 ) 2 0 7 8 - 3 1 6 2

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AmInvestment Bank Bhd (23742-V) (A member of the AmBank Group)1 5 t h F l o o r B a n g u n a n A m B a n k G r o u p55 Jalan Raja Chulan50200 Kuala LumpurTel: ( 03)2070-2 444 ( r esearch)F a x : ( 0 3 ) 2 0 7 8 - 3 1 6 2

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Benny Chew

SR VP Equity Research 

8/19/2019 Construction Sector 160203

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Construction Sector   08 March 2016

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EXHIBIT 1: PROPOSED PENANG UNDERSEA TUNNEL AND ROAD PROJECTS

Source: The Star