Monday, December 20, 2010

Gamuda, MMC best stock performers

MMC Corp rose to its highest level in more than five weeks in Kuala Lumpur trading and Gamuda Bhd. gained after Malaysia’s government awarded the builders a mass rail network project in the capital.

Shares of MMC, based in Kuala Lumpur, advanced 2.1 per cent to RM2.94 at 11:20 a.m. local time, set for its highest close since Nov. 11. Gamuda added 1 per cent to RM3.87, headed for its highest close since Dec. 2. The two stocks are the best performers on the FTSE Bursa Malaysia KLCI Index, which lost 0.1 per cent today.

“The wheels are in motion, the news is hugely positive,” Sharizan Rosely, an analyst at CIMB Investment Bank Bhd, wrote in a report today. “We’re encouraged by the speed of the implementation of the rail project, which speaks volumes of the government’s aim to improve the execution” of such projects, the analyst wrote.

The award of Malaysia’s biggest infrastructure project was announced by Prime Minister Najib Razak on Dec. 18. The rail development is among the $444 billion of private sector-led projects identified by the government to spur investments and accelerate growth in Southeast Asia’s third-largest economy.

The Gamuda-MMC venture was named project manager to oversee the rail development and work will start in July, Najib told reporters in Subang Jaya, near Kuala Lumpur, on Dec. 18.

Tunneling Expertise

Estimated in 2009 to cost about RM36 billion, “it is subject to change when we launch the project,” Najib said. “We have to take into consideration the cost of raw material prices at that time.”

The two companies will also have the responsibility of having to deliver the project within an agreed time and cost, the government said in an e-mailed statement on Dec. 18. They will only be allowed to tender for tunneling works, it said.

Gamuda and MMC “have the edge in the bid for the tunneling portion,” which is worth as much as RM14 billion, CIMB’s Sharizan wrote. They’re the only contractors with experience in major tunneling works, he said.

The rail project will create 130,000 jobs during its construction and the first line will run across central Kuala Lumpur from Sungai Buloh to Kajang, with 35 stations, the government said in its Dec. 18 statement. 

Source: Bloomberg

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