THE INVESTMENT APPROACH OF CALVIN TAN

MRCB (Part 4) Calvin Tan

calvintaneng
Publish date: Fri, 05 Jan 2018, 07:44 PM
calvintaneng
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Hi Guys,

I have An Investment Approach I which I would like to all.

MRCB George Kent may benefit from higher LRT3 cost 
Ho Chung Teng  (Please refer to latest Focus Mag. article)

Construction cost for LRT3 could increase to RM15 bil,
from an earlier target of RM9 bil

The cost of constructing the Light Rail Transit 3 (LRT3) is expected to escalate to RM15 bil

from the initial estimate of RM9 bil due to the higher cost of raw materials and labour.

The increased cost may not augur well for the contractors, which are likely to see a dent in

their margins, as steel and labour form the bulk of the project cost.

However, MRCB George Kent Sdn Bhd, which is the project delivery partner (PDP) for the project,

stands to benefit as the higher construction cost will translate into higher fee payable for

the 37km project.

This is in contrast to Prasarana Malaysia Negara Bhd’s statement in 2015 that in the event

the project costs more than the initial estimate, the PDP fee will be reduced in accordance with

an agreed formula.

As the PDP, MRCB George Kent will be paid 6% of the total construction cost.

At RM15 bil, this works out to RM900 mil against RM540 mil if based on RM9 bil total cost.

“Substantiation of costs must be adhered to by all WPCs (work package contractors).

The tender process is on-going. It is not appropriate to speculate on the project cost at the moment,” says a MRCB George Kent spokesperson when asked to comment.

As of Nov 20, only 21 out of 59 LRT3 work packages have been awarded.

The spokesperson says the LRT3 tender award process is expected to be completed

in the first quarter of next year.

 

In 2015, Prasarana president and CEO Datuk Azmi Abdul Aziz gave an assurance that the construction cost for the LRT3 will be contained at RM9 bil

 

 

Kenanga Investment Bank, in a recent research report

on George Kent, says it foresees a higher revision in

construction cost of the LRT3 due to higher building material

and labour costs.

 

“We do not rule out the potential escalation in construction cost

for the entire project given that the cost of RM9 bil was quoted

several years ago,” it adds.

Using steel prices as a basis, which has seen its prices

increased about 60% from a year earlier, the research house

reckons the LRT3 cost could potentially go up to the range of

between RM14 bil and RM15 bil.

“Every RM1 bil increase in the LRT3 project cost would represent RM30 mil in additional pre-tax

profit to its existing locked-in PDP fee pre-tax profits of RM270 mil (based on RM9 bil contract size).

“Based on the recent LRT3 contract awards amounting to RM8.7 bil, we believe there is

further upside to the initial budgeted cost of RM9 bil as several work packages are still not awarded,” Kenanga adds.

Based on announcements, a total of RM7.15 bil worth of contracts have been dished out to

Gabungan AQRS Bhd (RM1.2 bil), Mudajaya Group Bhd (RM1.21 bil), Sunway Construction Group

Bhd (RM2.3 bil), TRC Synergy Bhd (RM760.55 mil) and WCT Holdings Bhd (RM1.66 bil).

According to reports, the RM7.15 bil worth of contracts awarded to date make up 70% of the total

work packages. Prasarana has reportedly said another RM2 bil worth of contracts

will be dished out by the end of this year and early next year.

On Aug 2, Prasarana awarded the RM1.56 bil Light Rail Vehicle work package to a consortium

made up of China-based CRRC Zhuzhou Locomotive Co Ltd, Siemens Limited China and Tegap Dinamik Sdn Bhd.

PDP’s job scope

In September 2015, George Kent (Malaysia) Bhd and Malaysian Resources Corporation Bhd

were

appointed by government-owned public transportation systems manager Prasarana as the PDP

for the construction of the RM9 bil Bandar Utama-Klang LRT extension.

In an earlier response to a FocusM article, George Kent said its role as the PDP is to manage

the LRT3 project and the contractors involved.

“The selection of contractors largely depends on their track record and costs submitted in the

tenders for the respective works,” it explained.

The company added that such selection translates into a natural cost management mechanism,

as costs are pre-agreed and contractors will have to manage within their costs as pre-stipulated

in the contracts.

“The fee payable to the PDP will not be impacted and in turn will not directly affect George Kent’s

earnings over the course of the project,” George Kent had said.

For the third quarter ended Oct 31, George Kent’s net profit rose to RM28.68 mil from RM23.74 mil

a year earlier, on the back of higher revenue of RM127.09 mil from RM122.09 mil.

Moving forward, George Kent says it will continue to work on sustaining its profitability for the next

few years, by delivering works from its RM5.9 bil outstanding order book.

 

Challenging to maintain project cost

In 2015, Prasarana had given an assurance that the construction cost for the LRT3 will be

contained at RM9 bil, amid the weakening ringgit then. It added that if the project costs more than

the initial estimate, the PDP fee will be reduced in accordance with the agreed formula.

Based on the current scenario, it may be challenging to keep the lid on the cost of

LRT3 construction.

 



A construction analyst foresees the construction cost for LRT3 to escalate, as raw materials

such as steel are on an upward trend. Contractors are also expected to incur higher labour

cost due to the labour shortage following the freeze on recruiting foreign labour implemented

from last year.

In the next six months, the analyst expects steel prices to rally following China’s pollution

restriction. 

 

 
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THE INVESTMENT APPROACH OF CALVIN TAN

Author: calvintaneng   |   Latest post: Wed, 3 Jan 2018, 09:57 AM   |  >> Go to Blog Dashboard

 

 


Image result for najib and tan kay hock

 

Calvin comments:

The PDP for LRT3 was Rm9 Billions. Now gone up to Rm15 Billions due to escalating costs.

6% PDP = Rm900 Millions. So MRCB/GEORGE KENT will get Rm450 Millions Fee each.

GKent share price already up a lot. Now for MRCB to play catch up!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 
This article first appeared in Focus Malaysia Issue 262.
 

 

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Discussions
Be the first to like this. Showing 25 of 25 comments

apolloang

semua cakap saja,3rd quarter profit down....show us the profit 1st

2018-01-05 22:17

davidkkw79

He can show you Holland road.

2018-01-05 22:19

calvintaneng

Profit?

See DRB got no profit

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5274289

A loss of 16.02 sen?


Then Govt pumped in profit!

See

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5351657

18.26 sen profit from BN Govt!!

So MRCB also got magic show coming!!

2018-01-05 22:31

joetay

till now, tun @calvintaneng didnt give us his stock picks for 2018.

lol..............

2018-01-05 23:11

apolloang

since drb loss so govt pump in money,mrcb no loss so govt no pump in money,only datuk calvin pump in money.....hahaha

2018-01-06 00:02

newbie2014

Calvin Tan's stock picks for 2018:

1. Muiind
2. Opcom
3. Dutaland

All underperform in recent rally, buy if u got guts

I dont know why, all laughing to banks in recentl klci bull run, anything u bougt jus returned in profits, but check these 3, not really, even could lose.

2018-01-06 07:07

John Lu 《HENGYUAN upgrade to SIA LANG》 TP RM30

From 2012 keep talking until now but Tun Calvin every year making losses. See his 2017 stock pick rank bottom 10 with -2.5%. Waste time

2018-01-06 09:46

John Lu 《HENGYUAN upgrade to SIA LANG》 TP RM30

214) calvintaneng -2.5% 97526.76 http://klse.i3investor.com/servlets/pfs/71329.jsp
28% DUTALND 0.540 0.400 49800|21% PBA 1.160+0.04 1.150 17300|21% BJCORP 0.350 0.340 58600|16% BPURI 0.340 0.435 45800|14% OPCOM 0.390+0.02 0.600 33200 (97346.00:180.76|237.24)

2018-01-06 09:51

joetay

but @john bro, tun calvin provides so much laughs for us. much like those hopeless dreamers in parkson.

lol.......

2018-01-06 10:36

moneykj

Calvin, why this year tak masuk stock pick? I can assess you thru stock pick. I still not sure who is better, between you and Cpteh. Tq also for yr 2 years tries in Drb. I gave a try on c37 for 2 days and got my early big ang pow.

May be yr decision not to contest in stock pick is wise choice but I will miss the Tom and Jerry story in i3.

2018-01-06 11:19

calvintaneng

Hahaha

moneykj made early big ang pow in drb c37.

good for you.

that's the way.

contest or no contest i think more important is to make some real good money.

i boight drb c30 at 12 sen and sold for 36 sen - a very nice 200% profit......but call warrant cannot be admitted to contest according to the rules.

so i rather be last in contest if my pocket be loaded with real profits....

2018-01-06 11:34

calvintaneng

Joetay

calvin provides so much laughs for you?

Good.

MAY YOU ALL CONTINUE TO LAUGH IN THIS BULL RUN TIME!

ALL MAKE SO MUCH REAL MONIES AND LAUGHING ALL THE WAY TO THE BANKS.

2018-01-06 11:36

calvintaneng

John Lu,

Perfectly ok. I lost 2.5% when contest ended in December 2017.

But i still holding these great stocks

1. PBA.. Rock solid recession proof stock. Sifu Dr. Neoh Soon Kean is also in Top 30 holders

2. OPCOM. Both Insiders including Choah Kwang Hua still buying. Even Mukhriz still buying millions in off market. So Calvin is fearfully buying more. When people feared W. Buffer said be greedy.

3. Bpuri
Ha! Still happily holding. Just like i held on to Jaks at 40 sen when nobody wanted in Dec 2014.

4. Bj Corp
This one? Will only reveal secret first to my inner circle friends.

5. Dutaland.
Buta buta beli duta nanti dapat juta!

SO CALVIN WILL BUY EVEN MORE IF PRICES REMAIN UNMOVED UNLOVED AND OVERLOOKED

2018-01-06 11:45

calvintaneng

Sultan apolloang

Who say Govt pump in money because Drb got losses and mrcb don't?

Mrcb making losses in edl toll. Now taken private. Next Govt will pump in money soon. And soon Mrcb will fly like Drb

2018-01-06 11:48

calvintaneng

Newbie

since you so new let Calvin tell you a Big Secret

During Bull Run time in the GoGo years before the Asian Financial Crisis i was in the Trading House of KL.

That time they paid out contra gains in cheques.

i saw one guy holding stacks of contra gains cheques.... at that time it was T-7 or even longer.

So many made monies just by buying contra.

So i asked him, "What is your secret of making so much money?"

This is his reply, "Buy those that haven't move yet"

YESSS!

BUY THOSE THAT HAVEN'T MOVE YET.

SEE

MPHBCAPITAL IS ALSO A PROXY TO DOWNSTREAM REFINERY IN PETRONAS RAPID BY VIRTUE OF ITS PRIME LANDS VALUED AT ONLY 82 SEN PSF.

BOTH HENGYUAN AND PETRON HAVE MOVED AND MOVED UP A LOT!!!

AND MPHBCAP HASN'T MOVE YET. SO?
SO GO HAMMER MPHBCAP. MAYBE IT WILL MOVE TO RM10.00. WHO KNOWS?

IF HENGYUAN COULD MOVE FROM RM2.00 TO ALMOST RM20.00 WHY CAN'T MPHBCAPITAL MOVE TO RM10.00 WITH IMMENSE VALUE OF 9 STREAMS OF INCOME??

2018-01-06 12:21

apolloang

really don't think mrcb is another drb.maybe can up but cannot up so much as drb unless mrcb make profit 800mil or above

2018-01-06 19:50

joetay

@apolloang,

tun calvin dont even have the guts to enter into stock pick 2018, just like those hopeless parkson dreamers.

dont expect tun calvin to have the basic investment knowledge since he can even earn negative return in an ok yr.

2018-01-06 19:53

calvintaneng

Mrcb makes profit rm800 k or more

Alteady more than that if you calculate

sale of menara shell
edl toll compensation
lrt3 alone got rm450 million profits
sale of land to thb
rm1.14 billions from bkt jalil land sale to epf
coming soon
sale of menara celcom
pdp for hsr

not mentioning bandar malaysia yet

2018-01-06 22:37

apolloang

sale of properties not growth datuk calvin.but anyway I make 2 rounds already on mrcb-wb,thanks to datuk calvin.keep posting your picks cos I don't simply buy.i do my own research before buying anyway

2018-01-06 22:44

joetay

but @apolloang kor, tun @calvin does provides some good entertainment at times, just like sissy @orange88.

lol........

2018-01-06 22:45

apolloang

why keep entertain the orang gila? u better remind him to take his medicine before she sleep.....hahaha

2018-01-06 23:13

joetay

saturday nite no women accompany me so need to make fun of idiots like @orange88/flyinghigh-then-crash.

lol..............

2018-01-06 23:15

apolloang

weekdays women can accompany,weekends is soccer time.....hahaha

2018-01-06 23:37

joetay

lol......... well said.

2018-01-06 23:48

calvintaneng

Post removed.Why?

2018-03-24 11:24

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