GAMUDA BERHAD (Stock code: 5398) Worth to buy

Gamuda Berhad through its subsidiaries, the company provides earthwork construction, manufactures and supplies road surfacing materials, and operates quarry and road laying projects. It also has operation in hiring and rental of plant and machinery, develops properties, and manufactures and sells paper.The front runner for the mass rapid transit (MRT) tunnelling project – the Gamuda Bhd-MMC Corp Bhd joint venture – may be put in a tough spot to match the lower bids from some of the pre-qualified bidders, industry sources said. Five companies had been pre-qualified for the project, including Gamuda-MMC, China’s Sinohydro Group Ltd, South Korea’s SK Holdings and two other parties from China and Japan. Gamuda-MMC was the only local company shortlisted.
The tunnelling works for the MRT is estimated to cost RM7bil and the financial newspaper reported that the pre-qualified parties had three months to submit their bids.
It had been reported that the project delivery partner (PDP) of the MRT project, Gamuda-MMC, would have the upper hand in bidding for the job as it was given the right to match the lowest offer from other bidders for the tunnelling job under the Swiss challenge system (Gamuda-MMC has to match the lowest bid to win). However, bidders from China are said to pose a threat to Gamuda-MMC due to their expertise and experience in tunnelling jobs as well as having the financial muscles to undertake the project.

A reliable source added that local parties have a price advantage of between 3.5% to 7.5%, depending on the level of local and bumiputra equity participation in the project. “However even with this price advantage, Gamuda-MMC could still be hard-pressed to match the pricing of some of the other bidders,” an industry source said. (The Edge, October 24, 2011)