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KUALA LUMPUR — A joint venture between builders Gamuda and MMC has received preliminary government approval to manage a RM36 billion rail project, sources with direct knowledge of the deal said on Friday.
The companies got approval to oversee the building of a 156-kilometre mass rapid transit project in the capital, Kuala Lumpur, and the surrounding areas after a weekly government cabinet meeting, said one source who declined to be identified.
Gamuda and MMC were not immediately available for comment.
“However, it’s not certain whether Gamuda-MMC will also be awarded the tunnelling portion of the project,” the source said, referring to the RM14 billion drilling component of the project.
The rail system is part of a government plan to alleviate traffic congestion in the capital, and is expected to spur a slew of other building projects and contribute to economic growth.
The companies got approval to oversee the building of a 156-kilometre mass rapid transit project in the capital, Kuala Lumpur, and the surrounding areas after a weekly government cabinet meeting, said one source who declined to be identified.
Gamuda and MMC were not immediately available for comment.
“However, it’s not certain whether Gamuda-MMC will also be awarded the tunnelling portion of the project,” the source said, referring to the RM14 billion drilling component of the project.
The rail system is part of a government plan to alleviate traffic congestion in the capital, and is expected to spur a slew of other building projects and contribute to economic growth.
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Analysts expect the Gamuda-MMC venture to get the tunnelling job as they have had similar previous experience.
Local media had previously said the government was contemplating a “Swiss Challenge” model for the tunnelling project, where other parties are invited to put in bids that match or better Gamuda-MMC’s offer.
Construction analysts said the market had not fully priced in the award of the contract into the companies’ share price.
“Our target for Gamuda is RM4.64 per share, so there’s still more room to move,” OSK Research analyst Jeremy Goh said.
But another construction analyst said investors were cautious about the project’s execution, though Prime Minister Najib Razak’s drive to improve transparency could improve matters.
“If you look at all these huge government projects, they are always subject to political risks and delay,” he said, referring to the award of a RM515 million rail project spanning the peninsular, which was delayed by flip-flops in government policy.
A Thomson I/B/E/S survey of 22 analysts pegged the average target price for Gamuda shares at RM4.25, with a median price of RM4.40. Seventeen of the 22 analysts had a Buy or Strong Buy recommendation on the stock.
For MMC, Thomson data showed that seven out of nine analysts had a Strong Buy or Buy call on the stock, at an average target price of 3.30 ringgit per share.
MMC and Gamuda’s shares rose 2.7 per cent to RM3.83 and 2.9 per cent to RM2.88, respectively, on Friday, outpacing a 0.16 per cent rise in the composite index.
Reuters
Local media had previously said the government was contemplating a “Swiss Challenge” model for the tunnelling project, where other parties are invited to put in bids that match or better Gamuda-MMC’s offer.
Construction analysts said the market had not fully priced in the award of the contract into the companies’ share price.
“Our target for Gamuda is RM4.64 per share, so there’s still more room to move,” OSK Research analyst Jeremy Goh said.
But another construction analyst said investors were cautious about the project’s execution, though Prime Minister Najib Razak’s drive to improve transparency could improve matters.
“If you look at all these huge government projects, they are always subject to political risks and delay,” he said, referring to the award of a RM515 million rail project spanning the peninsular, which was delayed by flip-flops in government policy.
A Thomson I/B/E/S survey of 22 analysts pegged the average target price for Gamuda shares at RM4.25, with a median price of RM4.40. Seventeen of the 22 analysts had a Buy or Strong Buy recommendation on the stock.
For MMC, Thomson data showed that seven out of nine analysts had a Strong Buy or Buy call on the stock, at an average target price of 3.30 ringgit per share.
MMC and Gamuda’s shares rose 2.7 per cent to RM3.83 and 2.9 per cent to RM2.88, respectively, on Friday, outpacing a 0.16 per cent rise in the composite index.
Reuters
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