Construction Services

Construction Services

- Reboot in public investment to be a long-term boon for contractors
- BUY ITD, CK and STEC
- Bt2.4trn mega project: Mission Possible

FY2015 budget heavy on public investment. The NCPO approved the eight-year
infrastructure plan totaling Bt2.4trn on 29 July 2014. Of this, the budget for public
investment is ~Bt450bn, or 17.5% of the total budget, working out to more than 20%
growth in public investment in FY2015 (October 14- September 15), above the annual
average of Bt350bn in 2008-2013. The final draft is scheduled to be approved by the
National Legislative Assembly on 6 August 2014. This opens the door for years of work.
Most money going into roads, rail and rapid transit. The three areas getting the
most of the Bt2.4trn budget for infrastructure are roadways (48%), railways (20%) and
MRT (22%); ITD, CK and STEC are all well positioned to get many of these.
Rapid transit first. We expect this to start off with a bang. First on the cards is the
bidding for the M&E system and O&M services for the MRT Blue Line extension (27km).
This needs to be fast-tracked in order to complete the entire project by the scheduled
end-2018. CK is ideally situated to get the M&E system (~Bt25bn) from BMCL’s
concession for this project, which is valued at Bt100bn.
Next is the M&E system and O&M services for the BTS Green Line extension, Bearing-
Samut Prakan (13km). The total value of the project is Bt59bn, comprised of civil work
of Bt15bn (already in CK’s backlog), leaving the M&E and O&M portions. We estimate
the value of the M&E system at Bt10-15bn. BTS is likely to get the concession, passing
on the actual job to ITD, who has been the main contractor from the beginning.
Third, yesterday, SRT announced the sole qualifying (and only) bidder for Contract #3
for the SRT Red Line (Bangsue-Rangsit, 26km), MSHC Consortium (a joint venture
between Mitsubishi Heavy Industrial, Hitachi and Sumitomo Corporation). The bid was
Bt49bn, far higher than the Bt29bn starting bid set by the SRT. We believe this
indicates lower competition now that many jobs will come up for grabs.
What about 2015? This is essentially unchanged from the previous plan and we
expect local contractors to get most projects. In the FY2015 budget, infrastructure
spending expected to be allocated as follows: Bt38bn for the MRT’s Green Line
(Morchit-Koo Kot), Bt50bn to the SRT’s Red Line contract 3, Bt22bn for railway system
improvement, Bt38bn for roads and bridges to provide AEC linkage throughout the
country (only the first step), and Bt13bn for 3,500 NGV buses. Infrastructure projects
already in the pipeline are ready to kick off in October 2014 when the FY2015 budget
year begins. In the FY2015 budget, public investment into existing projects is ~Bt361bn,
a raise of Bt9bn or 3% YoY from FY2014’s budget and includes water projects, a flood
protection system, transportation and logistics improvement, roads, railways, etc.
Long-term backlog is coming. We believe ITD can take ~Bt513bn in projects as it
already has long-term backlog, on which it will book an average of Bt64bn p.a. over the
next eight years. CK is estimated to get Bt360bn or an average of Bt46bn (between
Bt30-65bn) in the same period. STEC, although it has tried to bulk up backlog with jobs
from the private sector, should still have available capacity of Bt250bn.