Gamuda ... Jan 2009

GAMUDA 1QE OCT 2008 PROFIT FALLS - BLAMES PENANG GOVT

GAMUDA recorded a 1QE Oct 2008 Profit decline as two of its key projects would be delayed for at least a year, said its Group MD - LIN YUN LING after release of 1QE Oct 2008 results on Dec 16, 2008.

1QE OCT 2008 RESULTS
GAMUDA's Net Profit for 1QE Oct 31, 2008 plunged 37.5% to RM55.0m from RM88.0m in 2007 as its property and construction divisions were hit by the current weak property market and delays in its electrified double-tracking project.

Revenue rose 27.27% to RM613.9m from RM482.4m a year earlier while EPS fell to 2.74 sen from 4.43 sen. It proposed a dividend of four sen against 12.5 sen a year earlier.

GAMUDA said its property division saw lower profits from the weak property market, while its construction division also saw lower profits, due to slower work progress in the rail project, as a result of the late handover of land from the authorities.

LIN said that the delay of the double-tracking project and slow down in the 'Yen So' land parcel sale project in Vietnam contributed to its profit decline. " .... Obviously, earnings and cash flow will be impacted ....".

VIETNAMESE PROJECTS
GAMUDA's activities in Hanoi included the construction of a sewage treatment plant, the redevelopment of Yen So Park, as well as a commercial development with an estimated sales value of RM8 bil.

" .... We have commenced construction on the sewage treatment plant and work on the park and the beautification of the lake is in full swing. We expect to complete it over the next 24 months ...." LIN said.

On the commercial development, he said that work on the first of five phases of the 500-acre project would begin in the next six months, starting with projects that GAMUDA would develop itself.

The Company's projects included the development of a waterfront retail area and an office tower block. Phase 1, when completed, was expected to be worth about USD200m.

GAMUDA's plan, according to LIN, was to bring in foreign investors to co-develop the other land parcels for, among others, a retail mall, hotels and office buildings.

DELAYS DUE TO LACK OF INVESTORS
The delays faced by GAMUDA, he added, were caused by difficulties in securing investors for these other parcels as the economic crisis had tightened the flow of credit.

" .... We're quite pleased with the level of interest shown, but we expect the financial crisis to have an impact on pricing and on whether investors could arrange financing for their investments .... It will not surprise us if there is a one-year delay in terms of tying up these large investment parcels .... So far, we have gone through due diligence with one investor but they came back and told us there was difficulty arranging loans because banks are not lending these days ....". LIN said that the investors were not from Malaysia.

ELECTRIFIED DOUBLE-TRACKING PROJECT
As for GAMUDA's electrified double-tracking rail project, which is being done as a JV with MMC CORPORATION, LIN said he expected a delay of about a year as there were problems securing land from the Penang Government.

" .... So far work progress has been satisfactory .... Our only concern now is land acquisition. The project runs through the four northern states of Perlis, Kedah, Penang and Perak .... The land acquisition is progressing well in Perak, Kedah and Perlis but there are substantial delays in Penang, partly because of the huge number of squatters between the railway right of reserve ....".

The project started in Jan 2008 and the Government was supposed to deliver the land nine months after the start of the contract, but was now expected to take another year, LIN said.

" .... The work progress achieved to date is about 18%, with 83% of the contract works and services (including electrification system works) awarded to various bumiputera and non-bumiputera sub-contractors and suppliers.

" .... Under the terms of the contract signed by the project company and the Government of Malaysia, 95% of the total land should be handed over by now but so far, only 61% has been handed over.

" .... The project faces potential delay as a result of the delay in land acquisition especially in Penang. Up to now, the delay in project completion due to the delay in land acquisition is estimated at one year ...." said the statement.

On reports that the price of the project may be reduced to RM10 bil, LIN said that the Government has committed itself to the original RM12.5 bil price tag.

RAIL PROJECT FUNDING
LIN also disclosed that the Government had changed the structure of the project's funding. " .... The Government has also made a decision that part of the funding on the project would be on a deferred payment basis, meaning the Government could have entities such as EPF and BANK PEMBANGUNAN finance the project on the back of a Government undertaking to pay them later ....".

THAI PROJECT
On its 'Nam Theun 1' project in Thailand, GAMUDA said the project company was still in negotiations with the Electricity Generating Authority of Thailand (EGAT) for a new tariff agreement, which would take into account the increase in construction costs due to the delay in project implementation by the client.

The statement said that the protracted negotiation with EGAT was expected to be delayed until the political impasse in Thailand was over, adding the project company expected the negotiation to be finalised by the end of the financial year.

NO DIVIDEND POLICY
In response to analyst concerns over dividend payouts, LIN said the Company had no such policy.

" .... The outlook for the coming quarters is expected to be challenging. Nevertheless, due to the Group's existing Order Book, the earnings for the rest of the current financial year should remain stable and satisfactory ....".

GAMUDA SLAMMED BY PENANG GOVT

Meanwhile the Penang Government took a swipe at GAMUDA for alleging the state's inability to relocate squatters as the major reason for the substantial delay to the RM12.5 bil double-tracking project which should be completed by Jan 2013.

Penang Chief Minister - LIM GUAN ENG - slammed the construction giant for the lame excuse that the state government was slow to relocate the squatters in the area of which some 63km of the total 329km-track would run through.

LIM said the 63km of track in Penang encompassed 833 acres of private land and 69 acres of state-owned land which together houses 489 residential homes, 48 commercial properties, 18 Chinese temples, 19 Indian temples and two suraus.

" .... We do not have problems with those involving state land. The problem is GAMUDA is not paying adequate compensation to relocate and resettle residents who are on private land .... " said LIM at a press conference at the Parliament lobby.

LIM added that the construction giant could either pay an earnest sum to the squatters and apply for the land acquisition through the court process or engage the state government to assist in the relocation with adequate compensation to the squatters.

" .... The question of delay does not lie in the state government. I would like to advise GAMUDA to think very carefully before they make any allegations ...." LIM pointed out.