Economy  |  FEBRUARY 20, 2013 12:11PM

Much unknown about multi-billion high speed rail project

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The announcement of the KL-Singapore High Speed Rail (HSR) project has been greeted with cautious optimism by analysts who say more information is needed before a comprehensive analysis can be made.

One analyst pointed out that the results of important feasibility reports commissioned to study the viability and practicality of the project had yet to be released. Therefore there was a lot of speculation and it was difficult to draw a comprehensive picture about this project. Primary areas of concern with regards to funding and to land acquisition have yet to be addressed.

Terence Wong of CIMB focused on the convenience issue saying “it will take away the inconvenience of flying, which includes the traveling (to the airport), check in and security.” He believes time cost savings could make this a popular option for travellers .


UOB Kay Hian’s Jonathan Lai focused on the potential beneficiaries of the project, “I believe the construction will go to a foreign company, such as China Railway or Siemens…I do not believe that our big local players will be the main construction company,” he said. However he added that while none may secure the main contract, he believed that many could potentially benefit from the spillover of such a big project.

Both analysts agreed that the stand out benefit would likely be the increase of Singaporeans coming to into KL. CIMB’s Wong highlighted that currently while many Malaysians make frequent journeys into Singapore, not many Singaporeans make the trip into KL. With the convenience of a high speed rail service these numbers could increase substantially.

Should this increase happen, then the property, retail and gaming industries stand to benefit the most, says Lai. He highlights Genting as a potentially big winner, along with retail REITs (real estate investment trusts) such as Dijaya and Sunway.

Analysts agreed that the aviation industry was likely to be the biggest loser of this project. Hong Leong Investment Bank aviation analyst Daniel Wong says that the scale of their losses will be dependent on the eventual ticket costs. “Based on the international benchmark, if we assume that the HSR ticket pricing is between RM140 to RM200, then AirAsia will remain competitive but not MAS.”

He explains that as a full service carrier, MAS would unlikely be able drop their KL-Singapore route prices to a competitive level. Airports are also likely to lose revenue due to a decrease in foot traffic.

The project was announced by Prime Minister Najib Tun Razak and his Singaporean counterpart Lee Hsien Loong in a joint press conference held in Singapore yesterday. It is hoped that the project will be completed by the year 2020.

The rail link will reduce travel time from KL to Singapore to around 90 minutes. The current journey takes around four hours in driving time. While a flight between the two cities takes around 50 minutes, travel time increases when other factors like check in time, security checks and other similar issues are factored in.

The project is to be built through a private-public partnership. No estimation of costs have been discussed. The project proposal first surfaced several years ago. YTL Corp had previously mooted the idea in 2006 but it did not go further than an initial discussion phase.

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