The Greater Kuala Lumpur project only benefits the construction industry
In September 2010, the Malaysian government launched the Economic Transformation Plan (ETP), aiming to increase Malaysia’s gross national income to US$15,000 (approximately RM49,500) by 2020, create 3.3 million jobs, and attract 444 billion. USD (1.452 trillion ringgit) investment. Specific measures include the construction of high-speed railways, a new MRT system, the Trans-Asian Railway, new shopping streets and commercial districts, economic zones, etc., in an effort to promote the overall development of the Malaysian economy.
The most critical point of this plan is that Malaysia will build a "Greater Kuala Lumpur" with 172 billion ringgits. From the three aspects of hardware equipment, people's income and living environment, Kuala Lumpur will be among the 20 most livable places in the world in 2020. Cities are also among the top 20 cities with the highest economic growth rate in the world. Therefore, this is also known as the "Greater Kuala Lumpur Project."
Specifically, the "Greater Kuala Lumpur Plan" will increase the population living in the Greater Kuala Lumpur area from the current 6 million to 10 million in 2020. The government will also launch a special award to invite the 100 best companies in the world to Malaysia has established a base to attract a large number of foreign talents.
At the same time, the construction of a high-speed railway from Malaysia to Singapore, which will only take 1.5 hours from Kuala Lumpur to Singapore after it is opened to traffic, will attract a large number of Singaporeans to live in Malaysia, where prices are low.
The rapid population growth and a large number of foreigners drive a large amount of housing demand, especially the capital Kuala Lumpur, which has always been a populous place. More than 200 square kilometers of land has gathered more than one-tenth of the population of Malaysia. The housing demand is very large. Investment in real estate The prospects are very impressive.
Hong Leong Research pointed out that the Greater Kuala Lumpur area currently has a population of 7 million, accounting for about 26% of the country's population. Since 2010, the government has launched a total of 9 development projects under the Economic Transformation Plan (ETP).
In addition, the transportation system of Greater Kuala Lumpur has improved the regional system in public facilities such as the extension of the Light Rail Transit, the Express Bus System (BRT), the MRT, and the Kuala Lumpur High Speed Rail (HSR). In addition, road connectivity has been improved on several new highways.
In order to re-promote the development of Kuala Lumpur, the government has launched six development plans worth RM275 billion, such as: Tun Razak International Exchange Center (TRX), Independent Heritage Building (Warisan Merdeka), Bukit Bintang Center (BBCC), Malaysia City, Kwasa Damansara , Sai City Center (CCC), etc., its development land area is as high as 3355 acres.
Behind these large-scale projects, the government directly or indirectly (provinces provident fund bureau or national investment company) dominates. It is expected that these projects will receive government tax incentives, and their building occupancy rates will also be supported by government-related companies. For example, the Provident Fund Bureau will relocate its headquarters to Kwasa Damansara, and the National Investment Corporation will relocate to the independent heritage building.
MRT first line opened TOD related projects successively issued
The above-mentioned development projects will also benefit from the TOD plan. Kuala Lumpur Sentral Station is a good example of TOD-driven development. Hong Leong believes that after the opening of the first line of MRT in 2017, there will be more TOD related projects.
Hong Leong assumes that if 50% of the total development is the construction cost, this will bring the contractor a total of RM137 billion worth of construction projects in the next 20 years. Potential beneficiaries include WCT Holdings (WCT, 9671, Main Board Construction Group) and Jiadeng Holdings (GADANG, 9261, Main Board Construction Group) will benefit from ground works; Ipoh Engineering (IJM, 3336, Main Board Construction Group) and Sunway Construction (SUNCON, 5263, Main Board Construction Group) may win high-rise construction contracts and piling companies such as Peng Fat (PTARAS, 9598, Main Board Construction Group), Yigang Holdings (ECONBHD, 5253, Main Board Construction Group) and Yima Buildings (IKHMAS, 5268, Main Board Building Group) may also benefit.
UOA development has the highest risk
However, there is a potential surplus of office buildings and apartments in Kuala Lumpur, and traditional developers must compete with TOD-related and government-supported projects. However, most developers diversify their risks by developing and diversifying products in different states. In terms of risk exposure, UOA development (UOADEV, 5200, Main Board Industry Group) focused on office buildings has the highest risk.
Hong Leong added that Kuala Lumpur’s current population has an average retail space of 17 square feet per person, which is higher than Bangkok’s 9 square feet and 12 square feet. In the future, more shopping malls will be put into operation, and the room for rent increase will be limited.
Nevertheless, KLCC REIT (KLCC, 5235SS, Main Board REIT) and Pavillion REIT (PAVREIT, 5212, Main Board REIT) are both in prime locations and are not likely to be affected much. Ma Ziguihe (MQREIT, 5123, Main Board Industrial Investment Trust Group) has 80% of its revenue from office buildings. With the successive launch of new office buildings, its occupancy rate is predicted to face downward pressure.
At the same time, Malaysia and Singapore signed a bilateral agreement on the high-speed rail plan on Wednesday. For the 350-kilometer long Long-Singapore high-speed rail, 96% or 315 kilometers of the track will fall within the territory of Malaysia, and the remaining 15 kilometers will be built in Singapore. Construction will start in 2018, and the construction period will be 8 years and will be completed in 2025.
CIMB Research stated that the joint development partner (JDP) of the project will be announced in early 2017 to assist in the implementation of the high-speed rail project. As JDP will be responsible for the selection of relevant civil engineering tenders, the tenders for relevant engineering projects will be postponed until the end of 2017. The high-speed rail joint bidding targets will be announced in the fourth quarter of 2017, and the award of railway engineering projects is expected to be announced before the end of 2018, but this still depends on the status of civil engineering awards in the fourth quarter of 2017.
Long-Xin High Speed Rail Drives Railway Theme
CIMB believes that the signing of the agreement is an important milestone for this project, which is estimated to be between RMB 60 billion and RMB 65 billion. Although the project is still in its early stages, it is still closely related to the subway construction industry such as Gamuda (GAMUDA, 5398, Main Board Construction Group), WCT Holdings and Ipoh Engineering. As a railway-themed industry in 2017, CIMB is optimistic about the performance of Gambling and maintains the rating of “Outperform” unchanged.