MMC, GAMUDA SHARE PRICES RISE

Firms remain contractor for Sg BulohSerdang-Putrajaya Line underground works after agreeing to cut cost to RM13.11b

MMC Corp Bhd and Gamuda Bhd’s shares rose yesterday after the government gave the companies green lights to continue with the underground works of the Mass Rail Transit Sungai Buloh-Serdang-Putrajaya Line (MRT2) project.

This was after the MMC-Gamuda consortium agreed to a RM3.6 billion cost reduction, bringing the underground works cost to RM13.11 billion.

The consortium is the project delivery partner (PDP) for the MRT2 project.

MMC’s share price advanced four sen, or 3.57 per cent, to close at RM1.16 yesterday, while that of Gamuda edged 15 sen, or 6.47 per cent, higher to RM2.47.

MMC-Gamuda had previously agreed to cut MRT2’s aboveground works cost by RM5.22 billion, which was accepted by the Finance Ministry early this month.

However, its earlier offer to slash RM2.13 billion of the underground works cost was rejected by the government and a decision to terminate and re-tender the contract was made.

The termination led to vigorous short-selling of the companies’ shares. A day after the announcement, on October 8, short-selling in MMC and Gamuda shares was suspended after their share prices fell more than 15 per cent in early trade.

MMC’s shares hit a nine-and-ahalf year low at RM1.13, down 22 sen, or 16.3 per cent, while those of Gamuda plunged 78 sen, or 24.3 per cent, to a seven-year low of RM2.43.

Some RM671 million and RM1.93 billion was wiped out from MMC’s and Gamuda’s market capitalisation, respectively, on the day.

The ministry announced yesterday that the MMC-Gamuda consortium would continue with the MRT2 project, with a bigger cost reduction for the underground works.

Its minister, Lim Guan Eng, said the decision was made after a final round of talks on the reduction of the underground works cost.

AmBank Research (AmResearch) is positive on the latest development, saying that MMC and Gamuda have “made amends” with the government.

“We had said that corporate Malaysia has to learn that apart from maximising profit for its shareholders, it is equally important to maintain a cordial working relationship with the government and deliver goods and services to the rakyat in the best possible value for money.”

AmResearch said the reduction means MMC-Gamuda would have to carry out 60 per cent of the remaining works with an original contract value of RM9.6 billion at RM6 billion, representing a whopping 37.5 per cent cut.