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CONSTRUCTION22 Mar 2016

CRC to set up regional HQ at Bandar Malaysia

Sector report OVERWEIGHT

Mak Hoy Ken

mak-hoy-ken@ambankgroup.com

03-2036 2294

(Maintained)

Rationale for report : Sector upd ate

  The Assoc iated Press  (AP) reported that China Railway Group Ltd (CRC) is planningto set up a new regional centre in Bandar Malaysia. This new facility is expected to

cost ~$2bil. It is to house CRC’s consolidated regional businesses and operations.

  The latest plans by CRC comes after the China Railway Engineering Corp-IskandarWaterfront JV had announced in January its intention to acquire a 60% stake in the

Bandar Malaysia project from 1MDB for ~RM7.4bil.

  Bandar Malaysia is being positioned to serve as an important gateway to the KlangValley under the proposed KL to Singapore High Speed Rail (HSR).

  It is also supposed to have links to the Kuala Lumpur International Airport andChangi Airport, and the proposed Pan ASEAN Rail Transit to Bangkok.

  CRC’s latest moves could provide the group with a leg up in the race for the highly -coveted KL-Singapore High Speed Rail (KL HSR) project. Per the AP   report, CRC

said it is awaiting tenders to be called by both the Malaysian and Singaporean

governments.

  Last November, it was reported that 98 submissions were received following aRequest for Information (RFI) exercise that was called for this project  –  withEuropean companies/consortia dominated this list. There were also 14 submissions

received from East Asian firms, and another 13 from Malaysian outfits.

  CRC is making its presence felt in the region. Apart from the KL Singapore HSR, theinfrastructure giant recently secured a $5.5bil mandate to build Indonesia’s first highspeed rail line.

  More importantly, CRC’s reported interest in the KL HSR continues the risingmomentum of Chinese FDIs into Malaysia. To be sure, FDIs from China and Hong

Kong into Malaysia rose by a compounded annual growth rate of c.22% over the

past seven years, according to the Nikkei Asian Review .

  The rising weight of Chinese FDI’s and investments could provide legitimacy and astrong foundation to help fund some of the upcoming 11

thMalaysia Plan (11MP)

projects, the KL HSR notwithstanding.

  That said, we believe it is too premature to gauge the potential winners from the KLHSR project until more details on the tenders are revealed. Regardless of thewinners, this could provide multi-year spinoffs for local suppliers of building

materials and products, i.e. Lafarge Malaysia, Ann Joo Resources, IJM Corp (ICP)

and KimLun Corp (tunnel lining, segmental box girdles).

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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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this report may not be suitable for all investors. This report has been prepared for information purpose s only and is not an offer to sell

or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd may from time to time have a position

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For AmInvestment Bank Bhd

Benny Chew

SR VP Equity Research 

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Construction Sector   22 Mar 2016

AmInvestment Bank Bhd 2

EXHIBIT 1: PROPOSED KL-SINGAPORE HIGH SPEED RAIL

Source: NST