Gamuda eyes boost from overseas


SHAH ALAM: Gamuda Bhd intends to grow overseas contribution to its construction business to 50% within the next three years from 20% currently, underpinned by projects in Australia, Taiwan and Singapore.

Group managing director Datuk Lin Yun Ling said the move is necessary for the company to become a global player.

“No one likes to do it if they don’t have to.

“But there aren’t enough big projects in Malaysia, ” he told a press conference after the company AGM and EGM yesterday.

Lin also said more than half of the large construction projects in Malaysia were given to Chinese state-owned enterprises (SOEs).

“For these SOE contractors, if they want a project, they can even tender below cost. How are Malaysian companies like us going to compete with them? Therefore, we have no choice but to go overseas.”

He added that going overseas also allowed Gamuda to tap local talent.

“If we don’t go overseas, we will lose a lot of the younger engineers, many of whom are going to countries like Australia and Singapore to find suitable jobs.

“Therefore, we feel that it is better to have a business in these countries and have Malaysian talents work for us.”

Lin also noted that it was more difficult for SOEs to penetrate countries such as Australia.

“Compliance is stricter in Australia, compared with Malaysia, ” he continued.

In October, Gamuda acquired a 50% stake in Australia-based Martinus Rail Pty Ltd to leverage on the significant pipeline of construction projects there.

According to the July 2019 BIS Oxford Economic Report, rail infrastructure works in Australia are expected to grow 14% per annum until 2023.

Lin said Gamuda currently has two projects in Taiwan. “We expect to secure a third project soon. We also have a few projects in Singapore, ” he said.

Gamuda’s construction book currently stands at RM9.2bil. Overseas contribution to its property division currently stands at 70%.

Strong property sales in Vietnam bolstered the company’s earnings last quarter and cushioned the impact of lower income from its construction division. It posted a net profit of RM185mil in the three-month ended July 31 on revenue of RM1.5bil.

For the full financial year, its net profit was RM706mil compared with RM539mil previously.

The group currently has two ongoing developments in Vietnam namely Gamuda City in Hanoi and Celadon City in Ho Chi Minh City.

The two projects are the biggest contributor to the group’s overseas sales ahead of developments in Singapore and Australia.

Separately, Lin said Gamuda, which is building the proposed Komtar-Bayan Lepas Light Rail Transit (LRT) project in Penang, expects the first package to be awarded by the middle of 2020.

He said the Project Delivery Partner (PDP) signing for the package is expected to be done “within the next few weeks.”

“Design works will start immediately, ” he added.

The LRT project is part of Penang’s multi-billion ringgit Transport Master Plan (PTMP).

Gamuda was appointed the PDP for the PTMP.

Lin said the Bayan Lepas Free Industrial Zone (FIZ), of which half was built on reclaimed land, has been Penang’s success story over the last 40 years.

“The semiconductor industry, in the next 40 years, is expected to see explosive growth through the next wave of emerging applications in AI, automotive electronics, IoT and digital medical devices, ” he said.

Lin said the first island (Island A) will have an 800-acre next-generation Smart Industrial Park, located next to the current Bayan Lepas FIZ and Penang International Airport.

Additionally, Lin said part of the proceeds from the disposal of Gamuda’s toll business will be utilised to pay a special one-off dividend to its shareholders.

“That is all we can say for now. The government will first need to decide what to do with Plus, before making a decision on their deal with us.

“They need to cross that bridge first (with Plus). Hopefully in the next few weeks, the government will make a decision.”

At Budget 2020, the Cabinet approved the takeover of four Klang Valley tolled highways for RM2.36bil.

The highways are Shah Alam Expressway, Damansara-Puchong Expressway, Sprint Expressway and Smart Tunnel - all of which are linked to Gamuda.

Following the Budget announcement, AmInvestment Bank in an October report cautioned that the defensiveness of Gamuda’s earnings will be eroded with reduced recurring toll road earnings, which make up 35% to 40% of the company’s earnings.

In that report, the research house said it was maintaining its underweight call and forecasts considering that valuations of construction stocks.

It said construction companies, Gamuda included, had run ahead of their fundamentals in the heat of the euphoria sparked by the recent revival of the East Coast Rail Link and Bandar Malaysia projects.

Additionally, Lin said part of the proceeds from the disposal of Gamuda’s toll business will be utilised to pay a special one-off dividend to its shareholders.

“That is all we can say for now. The government will first need to decide what to do with Plus, before making a decision on their deal with us.

“They need to cross that bridge first (with Plus). Hopefully in the next few weeks, the government will make a decision.”

In Budget 2020, the Cabinet approved the takeover of four Klang Valley tolled highways for RM2.36bil.

The highways are Shah Alam Expressway, Damansara-Puchong Expressway, Sprint Expressway and Smart Tunnel - all of which are linked to Gamuda.

Following the budget announcement, AmInvestment Bank in an October report cautioned that the defensiveness of Gamuda’s earnings will be eroded with reduced recurring toll road earnings, which make up 35% to 40% of the company’s earnings.

In that report, the research house said it was maintaining its “underweight” call and forecasts of construction stocks. It said construction companies, Gamuda included, had run ahead of their fundamentals in the heat of the euphoria sparked by the recent revival of the East Coast Rail Link and Bandar Malaysia projects.

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