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Tuesday, July 22, 2008

Gamuda, IJM may be 'ideal' takeover targets: Macquarie

GAMUDA Bhd and IJM Corp, Malaysia’s second- and third-biggest builders, may be perfect takeover targets for Middle East companies seeking expertise for Gulf development projects, Macquarie Research said.

The shares of the two companies are cheaper than regional counterparts, and most of their stock is owned by shareholders without significant stakes, making an acquisition easier, Sunaina Dhanuka, a Kuala Lumpur-based analyst at Macquarie, wrote in a report dated yesterday.

“Companies like Gamuda and IJM could be ideal targets,” said Dhanuka, who has an “outperform” rating on both stocks. “Few Middle Eastern companies have the skills required to undertake large infrastructure projects. Gamuda’s skills are likely to be the most sought after.”

Persian Gulf investors are spending US$2.4 trillion on local construction projects, according to Dubai-based research company Proleads. Shares of Gamuda and IJM, which have built tunnels, roads and railways across Asia, have tumbled this year on concern growth is slowing at home, and a newspaper on July 20 reported a possible bid for Gamuda by a Middle East fund.

Shares of Gamuda, down 44 per cent this year, today rose 3.5 per cent to RM2.68 at 10.24 am in Kuala Lumpur, giving the company a market value of RM5.4 billion. IJM fell 2.9 per cent to RM5, extending this year’s drop to 42 per cent and cutting its market value to RM4.3 billion.

Gamuda’s largest shareholder, the Malaysian royal family in the state of Perak, supports the takeover plans by a Middle East fund, according to the paper, which didn’t name the possible buyer. The acquisition of the royal family’s 7.5 per cent stake is crucial to any takeover, the newspaper said.

Gamuda stock is trading at 18 times earnings, compared with an average of 22 among 20 heavy construction companies in Asia, according to data compiled by Bloomberg. IJM is trading at 11 times estimated earnings.

By Bloomberg

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