UPDATED - MAHB says aerotrain replacement project will cost 15pc more, not 30pc more

KUALA LUMPUR: Malaysia Airports Holdings Bhd (MAHB) has denied that the aerotrain replacement project will cost 30 per cent more, maintaining that the project cost increase will be capped at 15 per cent.

RHB Research in its report today suggested that the combined job value of RM176 million and RM456 million awarded to the IJM Corp Bhd-Pestech joint venture and Alstom Transport Systems (Malaysia) could be 30 per cent higher than the remainder work that was terminated.

This assumes that the contract for Alstom is distinct from the IJM-Pestech joint venture.

The increase is in comparison to the outstanding job value of the aerotrain project at the time of Pestech's contract termination, according to the investment bank.

A MAHB spokesperson refuted the report, which suggested a 30 per cent increase in costs for MAHB compared to the terminated work, calling it inaccurate.

It said it will be notifying RHB Research about the error.

MAHb said in its statement yesterday, that in order to ensure project continuity and adherence to the original timeline, its new contract with Alstom, excluding operation and maintenance, is expected to incur a cost increase which will be capped at 15 per cent, bringing the project cost to RM456.1 million.

This increase is attributed to interest holding costs, foreign exchange considerations, remobilisation expenses, as well as project coordination fees to Alstom.

Pestech initially secured the aerotrain project for RM743 million in Dec 2021 before being terminated as a contractor in Aug 2023 for non-performance.

The termination happened when the APM project was 37 per cent completed, which translated into an outstanding work balance of RM470 million.

Business Times has reached out to Malaysia Airports Holdings Bhd for comment.

IJM Corp via a 60:40 joint venture with Pestech International Bhd has been awarded a RM176 million job for the APM or Aerotrain project at the Kuala Lumpur International Airport (KLIA) by MAHB.

The joint venture is also under a consortium with the Alstom, which was the original equipment manufacturer for the same project.

Alstom is set to undertake the majority of the project's work scope, serving as the project coordination lead for a contract valued at RM456 million after taking into account foreign exchange considerations, interest-holding costs, and remobilisation expenses.

Works for the joint venture are starting this month and are set for completion by March 31, 2025.

This is IJM's third transport-related job secured in financial year 2024 (FY24) after the East Coast Rail Link spur line and Kuching Autonomous Rapid Transit project.

Meanwhile, RHB Research also noted IJM Corp could serve as a dependable partner for the automated people mover (APM) project, leveraging its rail credentials.

It noted that the presence of Alstom in the consortium further assures the timely delivery of the project, with a target completion set for the end of the first quarter of 2025.

"The reason being is that the latter has a solid track record in previous APM installation works at airports such as Los Angeles International Airport, Dubai International Airport, King Abdulaziz International Airport in Jeddah, and Munich International Airport," it said.

On that note, RHB Research has maintained a "Buy" call on IJM Corp with a target price of RM2.47.

In light of the recent job win valued at RM106 million, considering IJM Corp's 60 per cent share, the group has secured RM2.9 billion worth of jobs for the year-to-date in FY24.

This falls slightly below RHB Research's initial FY24 job replenishment assumption of RM4 billion.Likewise, RHB Research said IJM's orderbook has grown to RM6.5 billion.

Profitability-wise, the investment bank projects an eight per cent profit before tax (PBT) margin for the job.

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