Gamuda shares continue climb as market hopes for MRT2 contract renegotiation

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KUALA LUMPUR (Oct 12): Shares in Gamuda Bhd continued climbing in active trade this morning after rising 11.11% or 23 sen to close at RM2.30 yesterday.

The counter had risen as much as 4.78% or 11 sen to RM2.41 before paring gains to trade at RM2.37 as at 11.22am. It was the fourth most actively traded stock on the exchange.

"I think the market is reacting to the possibility that both (MMC-Gamuda and the government) could reach a middle ground," said AllianceDBS Research analyst Chong Tjen San.

Chong opined that recent newsflow suggests the parties are leaning towards a resolution that may include a renegotiation of the contract for the Mass Rapid Transit Line 2 (MRT2) project, although Gamuda may have to accept a lower margin.

"I don't think the stock price would re-rate to the level it was trading at (if Gamuda accepts a lower margin)," Chong said. The share price had closed at RM3.21 last Friday, before the Finance Ministry announced it was terminating the contract awarded to a joint venture between Gamuda and MMC Corp Bhd.

Yesterday, Minister of Economic Affairs Datuk Seri Mohd Azmin Ali confirmed that he is part of a four-man team of ministers set up by the cabinet to revisit the contract. Finance Minister Lim Guan Eng, Works Minister Baru Bian and Transport Minister Anthony Loke are also on the committee.

"We will re-examine the project to reduce its costs. We will look into it, but the need [for the project] is still there," he had said.