GEORGE TOWN (Aug 17): Prevalent “buy” calls by analysts on Gamuda Bhd based on its appointment as the project delivery partner (PDP) for the RM27 billion Penang Transport Master Plan (TMP) failed to lift the stock price today.

As at 3.16pm, Gamuda (valuation: 2; fundamental: 1.8) shares traded down 3.02% or 13 sen to RM4.17, with 1.07 million shares done, giving it a market capitalisation of RM10.3 billion.

Affin Hwang Investment Bank senior analyst Loong Chee Wei said the drop could be a result of market sentiment and investors being cautious in the present economic and political climate.

“The sentiments could be related to the terms and conditions surrounding the project and its execution, as each TMP component is dependent on approvals from the federal and state governments.

“The current market sentiment was perhaps reacting to the preliminary news on the PDP. Investors are being cautious,” he told theedgemarkets.com, while noting that foreign fundings have reduced to less than 25% in the group’s stakeholding.

Loong said while it is good that Gamuda was appointed the PDP for the Penang project, it should also focus on replenishing its order book in the construction sector.

He said a good order book featuring long-term projects such as the RM28 billion Klang Valley Mass Rapid Transit Line Two would take Gamuda to the next stage of growth.

On Friday, Penang Chief Minister Lim Guan Eng had announced that Gamuda would lead the SRS Consortium, with a 60% stake, along with Penang-based Ideal Property Development Sdn Bhd and Loh Phoy Yen Holdings Sdn Bhd.

The consortium will be tasked to execute the TMP with no cost overruns and delays resulting from the non-performance of contractors.

“The state government emphasises that all costs and expenses incurred will be fully borne by the PDP in the event that no approvals for each TMP component is obtained from the federal government.

“In other words, the PDP fully bears the risk of expenses and cost incurred which will only be met from the project proceeding, when federal government approval is obtained,” Lim had said.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)