Posted by Victor Yong > 2018-10-09 11:29 | Report Abuse

later, mof will call for final meeting die to repeated begging, appeal, etc ... share price will rebound, fingers crossed :)

Reference is made to the Ministry of Finance’s (MoF) media statement dated Oct 7 in relation to the MRT 2 Project (project).

Save and except for the aforesaid MoF media statement, MMC-Gamuda has so far not received any communication nor notification from MRT Corp, the counter party to the award of the project. Thus, there has been no official confirmation from MRT Corp that MMC-Gamuda has been terminated as underground contractor.



Supportive of government’s drive to improve fiscal health

In spite of the agreed contract price, in view of the present austerity measures pursued by the new administration and in support, in particular of the new government’s review of its financial commitment on major infrastructure projects, MMC-Gamuda has been engaged in discussions and negotiations with MoF over the past two months to review the scope of works and specifications of the Project with the aim of reaching a compromise on cost reduction.

Following therefrom and at the request of MoF, MMC-Gamuda has agreed to convert the project delivery partner model to a single turnkey contract for the elevated works with a price reduction of 23%. In respect of the underground works, MMC-Gamuda has so far offered a 24% reduction for the balance of the underground works. Through its media statement, MoF has informed that it has accepted the offer in respect of the elevated and system works only.



Offered reduction for underground works

The underground works awarded contract price is RM15.47 billion. As progress achieved is now 40%, the balance of the uncompleted underground works is now valued at RM9.6 billion. MMC-Gamuda has offered a reduction of RM2.3 billion which represents 24% of this value. The reduction is achieved through reducing the scope of works and lowering specifications for mechanical, electrical and architectural finishes of the stations. It was also achieved by reducing the number of entrances to stations and the number of active stations constructed. From a total number of 10 stations, four will currently be shelved.



Factors influencing the awarded underground works price

There are two main factors that have a major influence on the price of the underground works, namely:



1) Employer’s requirements

In comparison with MRT Line 1, the employer’s requirements has increased the scope of works significantly, example: Larger floor space, a fivefold increase in the underground entrance and pedestrian walkways. As MRT Line 2’s geology is complex, the average depth of the diaphragm walls in MRT Line 2 is 51m as compared with MRT Line 1 at 39m. During the initial tender process, MMC-Gamuda had submitted an alternative proposal with savings by reducing the prescriptive requirements without compromising the safety, performance and functionality of the operational railway. However, MRT Corp elected not to accept the alternative offered by MMC-Gamuda. The reductions currently on offer to MoF include some of these alternatives but only those applicable to the balance of the underground works.



2) Safety requirements

Given the high risk of sinkhole incidents arising from tunnelling through the extreme karstic limestone in the city centre and threading the tunnels through high-end properties, with financial losses running into hundreds of millions if affected by ground collapses, the insurance industry around the world have introduced extremely stringent risk management requirements governed by International Tunnelling Insurance Group via the British Tunnelling Society Risk Management Code of Practice BS6164:2011 and ISO 31000 Risk Management.

Insurers have applied these measures on MRT Lines 1 and 2 tunnelling risks against which MRT Corp has in turn introduced strict pre-qualification requirements that cannot be relaxed for the insurance industry to insure MRT Corp on the project.

MMC-Gamuda’s continued in-house developments and customisation of the tunnel boring machines (TBM) is an integral part of managing this risk against sinkholes that proved successful in MRT Line 1. The Variable Density TBM was developed together with the German manufacturer and despite winning an international Innovation Award from British Tunnelling Society, it still needs ongoing improvements in its development to mitigate sinkhole risks more effectively.

The extent of the geological challenges presented in MRT Line 2 are reflected by the fact that of the 12 TBMs required, we need 10 TBMs to be of this variable density type to effectively mitigate the karstic risk. This also increases the quantum of enabling works of grouting and ground improvement prior to the tunnelling.

Posted by Victor Yong > 2018-10-09 11:30 | Report Abuse

Award and tender process

MRT Corp awarded the undergrounds works to MMC-Gamuda in 2016 following an international competitive tender that, due to the challenging ground conditions, had stringent pre-qualification requirements with only five contractors pre-qualified by MRT Corp to tender, of which MMC-Gamuda was the only local contractor.

The bids were evaluated by the Reference Design Consultant, Arup Singapore Pte Ltd, appointed by MRT Corp. MMC-Gamuda’s bid scored the highest technical score and offered the lowest price. MMC-Gamuda’s price was lower than the pre-tender estimate prepared by Arup Singapore Pte Ltd.



Current progress of underground works

The underground works has progressed well and MMC-Gamuda had not received any complaints from MRT Corp regarding the execution of the underground works. To date, all 19 sites are active with 40% of the works completed. Two of the TBMs are already mining with the balance being assembled and ready to mine from next month onwards.



Consequences of termination

The termination of MMC-Gamuda will result in immediate job losses to a work force of over 20,000 personnel involved in the underground works from a supply chain of over 600 Malaysian companies.

Of the 20,000, over 3,000 are made up of MMC-Gamuda joint venture staff, and of this, more than 60% are bumiputera.

This will cause unnecessary hardship to a significant number of Malaysian work force in an already slowing market. In addition, the termination will unjustifiably expose MMC-Gamuda to a flood of lawsuits for compensation from terminated employees, sub-contractors, suppliers, manufacturers, and more whose contracts will similarly be terminated due to no fault of theirs.

In an international retender exercise intended by MoF, unless MoF significantly lowers the requirements, only foreign contractors will be eligible. The award will invariably be given to a foreign contractor who in turn will use experienced staff from their own countries.



Amicable resolution

MoF’s belief that MMC-Gamuda could offer more reduction for the underground works is premised upon the review by a local engineering consulting firm appointed by MoF. A significant part of the review findings were refuted by MMC-Gamuda on technical grounds as being too simplistic and arising from a lack of relevant experience. Ironically, MRT Corp which has a huge staff of experienced technical experts also issued their own report of the aforesaid consulting firm’s proposals on Aug 27, which carried similar views as MMC-Gamuda.

Notwithstanding MMC-Gamuda’s disagreement, in order to bridge the gap MMC-Gamuda had on Aug 8, Aug 21 and Sept 24 urged MoF to appoint an international engineering consulting firm with the relevant experience to carry out an objective review looking into all reasonable engineering and technical requirements.

Even though MoF has made known that the offered reduction of RM2.3 billion is still not adequate, to date it has not been conveyed to MMC-Gamuda an acceptable target figure that MoF has in mind. If the target figure is made known together with the components of the savings as individual items, both parties would be placed in a better position to re-examine these components from where savings could be derived and narrow down differences. The appointment of an international engineering consulting firm as proposed by MMC-Gamuda would greatly facilitate this exercise.

MMC-Gamuda remains open to further discussion with MoF and is amenable to cooperate with MoF in reaching an agreeable reduction. Our perception of the latest cost gap is that it is an amount which is not unbridgeable. MMC-Gamuda believes that MoF’s aim of achieving savings is best done by both parties reaching an acceptable compromise instead of terminating the contract and retendering the remainder of the underground works.

Posted by Victor Yong > 2018-10-09 11:41 | Report Abuse

:)

Gamuda - MMC-Gamuda ready to ‘bridge the cost gap’ to keep MRT underground contract
Author: AmInvest Publish date: Tue, 9 Oct 2018, 09:22 AM

Investment Highlights
We maintain our forecasts and FV of RM2.71 but upgrade our call to HOLD from UNDERWEIGHT. Our FV is based on 12x CY19F FD EPS of 22.6 sen, in line with our benchmark forward target P/E of 11-13x for large-cap construction stocks.
Our recommendation upgrade is premised upon: (1) a steep 24% plunge in Gamuda’s share price yesterday which we believe has very much reflected the negative news of the government’s decision to terminate MMC-Gamuda as the tunnelling contractor for the MRT2 project; and (2) MMCGamuda’s highly conciliatory tone in a statement released to the media after market close yesterday, which we believe may pave the way for an amicable solution to the impasse.
MMC-Gamuda said in the media statement that “MMCGamuda remains open to further discussion with the MOF (the Ministry of Finance) and is amenable to cooperate with the MOF in reaching an agreeable reduction”.
MMC-Gamuda revealed that it had offered the MOF a 24% reduction (RM2.3bil) for the balance 60% of the underground works amounting to RM9.6bil. The reduction was to be achieved by reducing the number of the underground stations from 10 to six, reducing station entrances and lowering specifications for finishes of the stations.
MMC-Gamuda also said that “even though the MOF has made known that the offered reduction of RM2.3bil is still not adequate, to date it has not been conveyed to MMC-Gamuda an acceptable target figure that the MOF has in mind”. MMCGamuda appears ready to make a deal with the MOF by announcing that “our perception of the latest cost gap is that it is an amount which is not unbridgeable”. The ball is now in the government’s court.
We believe Corporate Malaysia, Gamuda included, have increasingly had to learn that apart from maximising profits for their shareholders, it is equally important to maintain a cordial working relationship with the government, as well as to deliver goods and services to the rakyat in the best possible value-for-money way.
Source: AmInvest Research - 9 Oct 2018

Posted by gghaha > 2018-10-09 11:41 | Report Abuse

Good for long term hold only....will see returns in few yrs time...

Posted by Victor Yong > 2018-10-09 11:47 | Report Abuse

believe they would strike a deal... epf, kwap, etc are some largest shareholders of gamuda... also, gamuda and mmc r Malaysian companies :)

Posted by Victor Yong > 2018-10-09 11:49 | Report Abuse

make less for the remaining portion of the underground, treat the discount as donation to tabung harapan :)

Posted by Victor Yong > 2018-10-09 11:51 | Report Abuse

I think corporate Malaysia and the govt must work hand in hand to revive and transform the Malaysian economy together... :)

Posted by tuapuikia > 2018-10-09 11:52 | Report Abuse

is it safe to buy?

Posted by Jonathan Keung > 2018-10-09 11:52 | Report Abuse

Gamuda is the only local outfit with the tunnel borrowing machine. pricing is the key

Posted by limlim123 > 2018-10-09 11:56 | Report Abuse

given the past open tender process taken place, and peoples still believe in all LGE is doing. so it is seem good to have it cancelled and let the international player to come and do it with lower cost. even if it is happening, no be so happy as cost definitely not gonna be lower.

contract once signed, irregardless there is changes of government/management, words must be honored unless there is breach of terms. today private companies are of very supportive of government initiative for lowering cost and debt of country. but on the other hands, government treats private companies as crook without basis. if you LGE has the proof of corrupt practise. pls report to MACC.

on one hands, azmin said only government alone cant bring the country to a developed country status but also required private sector drive at the same time.

but looking at the rate how LGE is doing. sudah la.

Posted by JJchan > 2018-10-09 11:57 | Report Abuse

If i am Not wrong China Construction will sapu the bulk of contracts. This will please China Top
potatoes and release Jlow back to Malaysia (with extra low interest loan Since Japan is just talking Cock )

Posted by sjwee3 > 2018-10-09 11:57 | Report Abuse

Beg for contract is worst when revealing all the overbudget by Govt. Ball is now on govt count. For sure govt have better options.

Posted by Victor Yong > 2018-10-09 12:00 | Report Abuse

buy or not depending on your confidence they would reach a deal.. if it happens, windfall4u. anyway, if doesn't happen, nothing to lose also, without the underground portion, targeted price for gamuda by analysts range from.2.7 to 3+ also :)

Posted by Victor Yong > 2018-10-09 12:02 | Report Abuse

:)

09/10/2018 2.71 AmInvest Price Target News
08/10/2018 3.00 PUBLIC BANK Price Target News
08/10/2018 3.25 KENANGA Price Target News
08/10/2018 2.71 AmInvest

Posted by JJchan > 2018-10-09 12:05 | Report Abuse

Malaysia Not only need China market for Palm Oil but massive revenue earner ---Petronas LPG
will face serious competition from LPG generated from America Shale Oil production( coming in late 2019----when all Gas pipelines are competed to export terminal in Texas ) I am sure at that
time Tariff War will be over ) Trump is just a Bloody Con-Man but very Biz Minded

Posted by pengwin > 2018-10-09 12:08 | Report Abuse

From price and volume trend, likely to decline further today. Institutions and big players disposing.

Posted by pengwin > 2018-10-09 12:12 | Report Abuse

Our dear FM LGE just commented again at 11+ am today, he reiterated his stance to cut costs and re-tender because Gamuda did not lower the price for underground works to the level advised by his consultants....even if Gamuda renegotiate or re-tender, profit margin will be slashed massively, may even continue at cost price to cover capital costs of machinery and avoid lawsuits from vendors and retrenchments....govt can afford to wait but Gamuda is burning labour and maintenance costs for each day of delay while waiting for re-tender.

Posted by striker888 > 2018-10-09 12:13 | Report Abuse

Gamuda said no local company could afford to build the underground portion at the requested price, only foreign company could. Maybe foreign company doesn't have to pay all those commissions to the many levels middle men? Hahaha

Posted by godhand > 2018-10-09 12:13 | Report Abuse

limlim

LGE has done nothing wrong. there need to be a clear seperation of interest between the government and private sector. long term wise his action is the way to go.

Posted by sjwee3 > 2018-10-09 12:16 | Report Abuse

That gigantic boring machine is buying machine.for sure need to maintain.

Posted by pengwin > 2018-10-09 12:17 | Report Abuse

Is a do or die for Gamuda, majority of their revenue is from the KV-MRT project....if cancel, will lose more than $5B not including all the lawsuits from vendors and employees and other losses and costs such as severance, clean-up operations and scrapping of excess machinery and materials...this also symbolize that the new administration has little regard for goodwill and relationship with Gamuda, tough times moving forward....

Posted by pengwin > 2018-10-09 12:24 | Report Abuse

So far only market cap has only reduced by RM 2B+ , the potential losses have not been fully accounted for, not to mention the loss in goodwill and future prospects....still got RM 3B+ market cap to reduce.....just waiting for official confirmation letter from MOF...just look at all the othet construction stocks, it's not only Gamuda, but most other big contractors...weak future prospects due to tight government budget and new administration....crony is now a dirty word and political baggage

Posted by Victor Yong > 2018-10-09 12:24 | Report Abuse

they would strike a deal in the spirit of new Malaysia, fingers crossed

Posted by sjwee3 > 2018-10-09 12:26 | Report Abuse

Govt have no Inclusive responsibility for the job lose of 20k worker in this case.

Posted by Victor Yong > 2018-10-09 12:27 | Report Abuse

just be calm ... ytl, myeg, etc learn from it :)

Posted by Dato5Star > 2018-10-09 12:28 | Report Abuse

puii..

Posted by pengwin > 2018-10-09 12:28 | Report Abuse

Pakatan also looking for new crony ultimately....why should they help UMNO fill their coffers.... China is also desperate now with so many cancellations like ECRL and HSR, you can bet they will throw price just to get this deal for their OBOR investment plan, don't underestimate the power of CCCC, political backing and cheap foreign labour...China also want Malaysia in its good books since Tun is pro-Japan

Posted by JJchan > 2018-10-09 12:29 | Report Abuse

There is a clause in Gov. Contract (maybe not in Najib's contract)---you cannot sue Gov but Gamuda contract, i don't know----But if landed in Court, Gamuda can just push everything to
Gov Contracts cancellation ( Dead-End for Sub-Con ) The Bulk of the Sub-Con are BN members

Posted by Buns > 2018-10-09 12:29 | Report Abuse

I'm curious to see what is the new value of the underground deal. The JV has stated that their reduction for the underground work was in fact rejected by MoF. For them to open to international tender they have to relax their requirements.

BUT to relax their requirement, the insurers would then come knocking. Tough spot eh MRT?

Also, LGE has up to date not stated if he would compensate the contractors rightfully as stated on common clauses. Dear leader and shining hope of the Pakatan, please prove yourself a good man.

Yes you may terminate the agreement. That is your right. But termination comes with it's own clause. Do the right thing in the eyes of the law.

Posted by pengwin > 2018-10-09 12:30 | Report Abuse

The 20k workers can still work on the project under new contractor, suppliers and vendors can also switch to serve new contractor....Gamuda is just using the 20k jobs as excuse, it is Gamuda that stands to lose the most, not other companies

Posted by striker888 > 2018-10-09 12:33 | Report Abuse

CCCC uses cheap foreign labour, really? You mean cheaper than all the Indon and Bangla foreign labor that local construction companies use? Hahaha, gimme a break.

Posted by JJchan > 2018-10-09 12:33 | Report Abuse

20K Bangla Workers-----so gamuda is a International Welfare Organisation

Posted by EatCoconutCanWin > 2018-10-09 12:34 | Report Abuse

buy now , i think will gain 10% later 4pm

Posted by Victor Yong > 2018-10-09 12:35 | Report Abuse

buy n keep till January to collect your 6% div :)

Posted by pengwin > 2018-10-09 12:38 | Report Abuse

Even if Gamuda sue for compensation, you can bet how many years it will take, especially with this new govt....even if Gamuda win the lawsuit, it will be peanut consolation small fraction of revenue...and if Gamuda sue, forever no need to think of getting anymore projects from PH government....

Posted by Victor Yong > 2018-10-09 12:38 | Report Abuse

every year 12sen div :)

GAMUDA BHD

Second interim dividend 0.06
First Interim Dividend 0.06
Second interim dividend 0.06
First Interim Dividend 0.06
Second interim dividend 0.06
Rights Issue 1 : 6
First Interim Dividend 0.0600

Posted by pengwin > 2018-10-09 12:41 | Report Abuse

Fact is Gamuda is too heavily reliant on these govt mega-projects, their fate has been sealed on 9 May as they have been too dependent on crony culture and relationship with previous BN gov....all this is political baggage...their client base is too singular and narrow (BN gov), now the new PH gov has all the negotiating power over Gamuda....

Posted by JJchan > 2018-10-09 12:41 | Report Abuse

I saw in TRX Building 106----Chinese Contractors used there own Labors from China----Cannot
leaves Construction Compound (lived in Containers) The moment they finished their Job, immediately send Home ( talk about forced labor )

Posted by sjwee3 > 2018-10-09 12:43 | Report Abuse

It seem like all get slaughter without anything can complaint.

Posted by pengwin > 2018-10-09 12:43 | Report Abuse

Less than half of the forseeable losses has been priced in....still more than half to go...where is Gamuda going to find new contracts to replace the KV-MRT and replenish their order book....impossible in the current political climate.....MRT 3 gone, LRT 3 downsize and delay, HSR delayed indefinitely, ECRL cancelled...and don't even talk about compensation, Singapore want compensation for HSR, Tun also refuse to give...what more Gamuda

Posted by pengwin > 2018-10-09 12:47 | Report Abuse

Gamuda is in no position to negotiate at all, they either do or die, lose their sole client (PH gov) and they will be dead for the next few cycles...right now they will not think of compensation or penalties, that is why their letter is so polite even though they are rightfully angry....currently the only focus is how to avoid losses on their machinery and laborers, they will take whatever scraps they can get from LGE...even if they manage to hang on by a thread, it may very well be heavy losses...

Posted by Lucas Chan > 2018-10-09 12:49 | Report Abuse

Gamuda cheap sales right now, time to buy some

Posted by ks5S > 2018-10-09 12:50 | Report Abuse

Ini kali matilah

Posted by sjwee3 > 2018-10-09 12:51 | Report Abuse

Today got investment prospective 2019 talk. Speaker is Tun M and LGE at dewan Dawn

Posted by skhuei > 2018-10-09 12:52 | Report Abuse

But i think loser is the Government...EPF/PNB/ASB hold more than 20% of Gamuda

Posted by pengwin > 2018-10-09 12:53 | Report Abuse

I see so many speculators and gamblers trying to catch the falling knife...now is not the time...this is Gamuda not Genting....even if they survive this, you can expect prices to decline again because next few quarters will almost certainly be losses with the price cuts and delays....just think about it, 23% discount also LGE thinks not enough and want to cancel entire contract halfway in.....how much profit margin left for Gamuda....more like trying not to lose till the pants drop....and of course, if CCCC replace Gamuda, good luck trying to replenish 90% of lost revenue from the order book in the current political climate...even the remaining 10% Pan Borneo Highway also controversial...if LGE can cancel contract like this, what stops the 2nd, 3rd, 4th time...

Posted by kaliaoki > 2018-10-09 12:56 | Report Abuse

si liao ,can easily cut 15% cost for whopping 2.3bil in 2 months.
this project at very high risk with fixed direct cost and lack of economy scale and further reduction of scope will see no more light over the other end of tunnel

Posted by pengwin > 2018-10-09 12:57 | Report Abuse

LGE does not care about EPF/PNB/ASB in this case because even though they own 20% of Gamuda, Gamuda is just a small fraction of EPF/PNB/ASB total portfolio holdings....the impact to the voters is negligible...the cost savings from re-nego or re-tender is more important for political fame....

Posted by EatCoconutCanWin > 2018-10-09 12:58 | Report Abuse

the only company that got equiment and machines to korek tunnel only gamuda. there is no others, so buy now. tp 3

Posted by cksam > 2018-10-09 13:00 | Report Abuse

Victor Yong has been promoting Gamuda non stop since yesterday's Gamuda price crash. Before the big selloff this where was he? Gamuda must be his largest stock holding in his portfolio. I reckon he must be having a huge paper loss. Unfortunately he is promoting Gamuda in the wrong place. I3 is populated mostly by retail investors. Most bought 5 - 10 lots and further what i can say i that most investors here are already fully invested (or stuck with paper losses) in the market.

Thus no more funds to buy additional Gamuda stocks. From what i see in the price action, the selling in Gamuda is not done. More stocks will be unload in te coming days when margin calls starts. In fact i suspect in the afternoon session there might be another big sell off.

So, be prepare and brace for the coming selloff !!