Hot Stock Gamuda falls 2.4% on arbitration loss

Hot Stock Gamuda falls 2.4% on arbitration loss
Business & Markets 2013
Written by Chong Jin Hun of theedgemalaysia.com
Wednesday, 17 April 2013 10:53


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KUALA LUMPUR (April 17): GAMUDA BHD [] fell as much as 2.4% before recouping losses on news that the MMCEG-Gamuda Joint Venture's (JV) claim against Wayss & Freytag (M) Sdn Bhd has failed.

At 10.35am, Gamuda was traded at RM4.10 with some 4.6 million shares done after falling as much as 10 sen to RM3.99 earlier.

The market had earlier anticipated selling pressure on Gamuda shares ."We expect some selling pressure to kick in as sentiment will be dented. However, we would take this as a good opportunity for investors to buy on weakness,” said Alliance Research Sdn Bhd analyst Jeremy Goh who maintained the research firm’s "buy" call and target price of RM5 for Gamuda.

Gamuda said yesterday the MMCEG-Gamuda JV's arbitration proceedings against Wayss & Freytag has failed and is dismissed.

The JV had in 2008 initiated the proceedings against Wayss & Freytag for the latter's delay in completing a portion of the Stormwater Management and Road Tunnel Project in the country.

Wayss & Freytag had subsequently started arbitration proceedings on Gamuda in 2009. As the former was declared the winner in the process, the JV will have to compensate Wayss & Freytag involving a sum of RM96.3 million with interest of 5% a year.

Wayss & Freytag is also entitled to RM9 million as compensation for the costs involved in the process.

The impact to the earnings of Gamuda which has a 50% stake in the JV is RM77.81 million in financial year ending July 31, 2013.

According to Alliance's Goh, the research firm has cut its earnings estimates for Gamuda by 12.4% from RM629.9 million to RM552.1 million during the year after taking into account the impact from the latest development.