Gamuda cautious on sub-contract prices

> It’s something we have to be careful about in the next few years, says group managing director

SHAH ALAM: Gamuda Bhd, which is targeting to replenish its construction order book by RM6 billion-RM8 billion a year over the next two years, has warned that it cannot be complacent about sub-contract prices over the next few years as this may affect contract costs.

Gamuda group managing director Datuk Lin Yun Ling ( pix) said most of its sub-contractors are concerned about the supply chain being over-stretched when there are many big projects coming in.

“So far the sub-contract prices have not moved up much yet. But over the next two or three years, when other new projects come in, we will have to manage that,” he told a press conference after the group’s AGM here yesterday.

Lin explained that sub-contract works provide jobs for small and medium enterprises (SMEs) and if there are a lot of projects around, when SMEs get busy, their subcontract prices will go up.

“It’s something that we have to be careful about in the coming years. To a certain extent, it will affect the contract costs also. Overall, in the last few years (price increases) have been rather benign, but we shouldn’t be complacent about the next few years. We can’t take it for granted that it will stay benign,” he said. He added that mega projects like the MRT 3 and the East Coast Rail Link involve foreign funding, which usually comes with foreign contractors that can ironically help to ease pressure on the supply chain. “But then you don’t get the benefits of localisation. The government will have to weigh these different factors and make the right decision,” said Lin. Meanwhile, he said the MMCGamuda joint venture is fully focused on its underground works for the KVMRT Line 2 and is fully braced for the challenges over the next 24 months, adding that it will only bid for the Line 3 project when the opportunity arises. Lin said the company has completed the detailed ground mapping of the tunnel drives for KVMRT Line 2 and that four of the 12 tunnel boring machines are going through challenging mixed soil conditions. “We’ll encounter ground conditions that will change suddenly and drastically over a short distance. This is going to be challenging for four of the 12 tunnel drives,” he added.

Likening it to “extreme turbulence when you fly”, Lin said its tunnel crew will have to be at their best over the next 24 months.

“You don’t allow this to delay. You still have to arrive on time,” Lin said when asked if this will delay the project.

Gamuda has a current construction order book of RM8 billion that can last the group for three years. It is targeting property sales of RM3.5 billion for the financial year ending July 31, 2018 (FY18) after achieving record sales of RM2.4 billion in FY17.

Lin said although half of the property sales are from its overseas projects and half from Malaysia, two thirds of its property profits come from its overseas projects in Singapore, Hanoi, Ho Chi Minh City and Melbourne.

When asked on the sale of its 40%owned Syarikat Pengeluar Air Selangor Holdings Bhd (Splash) to the Selangor state government, Lin said there is no new progress as yet.

The state government has taken over water assets belonging to three water concessionaires operating in the state, which are Puncak Niaga Holdings Bhd, Syarikat Bekalan Air Selangor Sdn Bhd and Konsortium Abbas Sdn Bhd, except for Splash. Discussions between Selangor and the shareholders of Splash on the purchase price have been ongoing for some time.

On Puncak Niaga’s lawsuit against the state government, and whether it will help or hurt Splash’s chances, Lin quipped that it is too early to speculate.

“I can’t go into details. We’ll just have to see what the government’s response is,” said Lin.