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Thursday, February 21, 2013

Multiplier effect of M'sia-S'pore high-speed rail


Some sectors that will gain from the Malaysia-Singapore high-speed rail link. - The StarSome sectors that will gain from the Malaysia-Singapore high-speed rail link. - The Star
PETALING JAYA: News that Malaysia and Singapore have mutually agreed to build a high-speed rail (HSR) linking the two countries has excited both analysts and industry players alike, as the multiplier effect on the country's various sectors is likely to be huge.
The HSR, which will cut travel time between the two countries to 90 minutes from five hours, is targeted to be completed by 2020. With an estimated distance of 310 to 350km, analysts reckon the project would cost between RM20bil and RM30bil, inclusive of land acquisition.
While details of the connectivity points and locations for the HSR are yet to be available, analysts feel that the prospects of this new link alone is positive for the Malaysian market.
MMC-Gamuda JV, YTL Corp Bhd and IJM Corp Bhd make up the Malaysian firms with experience and a track record in rail construction at present. Naturally, the entire sector would benefit, with the smaller construction firms benefiting through sub-contracts, similar to the Klang Valley My Rapid Transit project.
IJM Corp chief executive officer and managing director Datuk Teh Kian Ming said that the company would definitely look forward to participating in the massive project.
“This development is definitely good news. It will improve connectivity and bilateral ties between Malaysia and Singapore. The property segment will benefit. Both Johor and the Klang Valley are two different markets which will benefit from this link,” Teh said.
Public Mutual said in a report: “We believe the high-impact infrastructure project to improve the connectivity between KL-Singapore through the proposed high-speed rail link will surely benefit construction and materials in the near term and will help to reduce the property price gap between Singapore and Malaysia in the long term.”
It maintains its “outperform” call on the construction and property sector.
Affin Research also expects the construction and building materials companies to benefit. Other beneficiaries include land owners along the rail link and key stations as well as property developers.
“Overall, we are positive on this development, as it will be a game-changer for the economic dynamics in Malaysia,” said UOB Kay Hian.
The research house noted that the winners included Genting Malaysia Bhd, as the HSR could see a ramp-up in Singaporean patronage, given the shorter travel time and easy access from Singapore to Genting Highlands.
“Malaysia provides cheaper gaming entertainment compared with the entrance fee to the Singaporean casinos (S$100 (RM250) per entry), and given Singapore's much stronger currency rate,” UOB Kay Hian said. “In the past year, Resorts World Genting has seen an increase in Singaporean arrivals that have exceeded the number of arrivals pre-opening of the Singaporean casinos.”
Affin Research said that property developers with significant land bank in Johor and prime locations in the Klang Valley include SP Setia Bhd,KLCC Property Holdings BhdUEM Land Holdings Bhd and Dijaya Corp Bhd.
Genting Malaysia could potentially see an improved footprint in its casino in Genting Highlands.
UOB Kay Hian likes Dijaya and Sunway Bhd, as they have exposure in both the key areas of Kuala Lumpur and Johor. The research outfit also likes retail real estate investment trusts or REITs, but feels that the aviation sector would see losers.
“We reckon that Malaysia Airports Holdings Bhd (MAHB) and AirAsia Bhd will be most impacted by the HSR on the Singapore-Kuala Lumpur route. About 12% of MAHB's passenger throughput involves traffic from Singapore, and at least 60% to 70% of these passengers could opt for HSR instead of flying,” noted UOB Kay Hian.
“The impact could be mitigated at AirAsia, although a lot would depend on where it shifts its capacity to as well as continued incentives to airlines. AirAsia has 19 weekly flights to Singapore, accounting for 6.7% of its total capacity.
“We are not too concerned by this, as AirAsia would be able to shift routes to other short-haul destinations and boost the KL International Airport's hub status,” the research house said.
Affin Research, however, said it was debatable whether airline companies would be negatively impacted, given the significantly shorter travelling time with the HSR link.

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