The Mass Rapid Transit Authority of Thailand (MRTA) on Tuesday opened the third proposal envelope for a tender for the construction of MRT Purple Line Project Tao Poon – Rat Burana route, with a maximum bid value of THB82 billion. The winner will be announced in late February.
The joint venture between Ch. Karnchang (SET: CK) and Sino-Thai Engineering and Construction (SET: STEC), has submitted a lowest offering price of THB35 billion for two contracts, as did Italian-Thai Development (SET: ITD), which offered a lowest price of THB16.7 billion for two contracts on its own and one contract offering THB15.1 billion in partnership with Nawarat Patanakarn (SET: NWR). Meanwhile, Unique Engineering and Construction (SET: UNIQ) offered THB14.9 billion for one contract.
MRT Purple Line Project Tao Poon-Rat Burana section, a total distance of 23.6 kilometers, with 13.6 kilometers of underground runway structure, ten stations, and ten kilometers of elevated runway, will commence construction in 2022 and be operational in 2027.
Maybank Securities (Thailand) (MST) stated that since major contractors won the civil construction bids, which are shared between CK, ITD, STEC, UNIQ, and NWR, and the auction bidding price is slightly below the average price by 0.1-0.75 percent, which should help boost earnings, MST maintains a NEUTRAL rating on the sector. The top picks are CK (TP: THB24) and STEC (TP: THB17). BUY on dip as prices surged yesterday.
As offered prices in line with median prices, MST believes this should benefit the performance of the construction contractors. However, MST is NEUTRAL on the sector because it is a volatile one with many risk factors such as the uncertainty of the auction, construction obstacles, construction material costs, labor problems, and trading at high P/E and low dividend yields. Thus, suggesting investors speculate stocks based on the timing of the auction.
