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Friday, June 12, 2009

Gamuda rises on rating upgrades

Gamuda Bhd, Malaysia’s second-biggest builder, rose to a 10-month high after Macquarie Group Ltd and Maybank Investment Bank Bhd upgraded the company’s stock rating, saying it will benefit from the government’s stimulus package.

The stock rose 1.8 per cent to RM2.83, at 12.30pm, headed for the highest close since Aug 15. Gamuda shares have jumped 50 per cent this year.

There is an “urgency on the part of the government to accelerate the rollout of infrastructure projects,” Macquarie said in a report today. Gamuda is a “potential beneficiary.”

Prime Minister Najib Razak has announced two stimulus plans totaling RM67 billion (US$19 billion) to help resuscitate economic growth as the nation nears its first recession in a decade. Gamuda has an outstanding order book of RM8 billion that should support construction earnings, Maybank Investment said in a report.

The company is expected to bid for “major” contracts such as the Sepang budget airport terminal, the Pahang-Selangor water transfer project and the Klang Valley railway-line extension, Maybank said. It will also bid for mid-sized jobs, or contracts valued at less than RM1 billion, to speed up its order book replenishment, Maybank said.

Maybank raised the stock rating on Gamuda to “buy” from “hold” and increased the target price to RM3.35 from RM2.50.

The outlook on Gamuda’s construction business has turned “more positive” and the stock will “re-rate on the back of positive newsflow,” Macquarie said. It upgraded the stock to “outperform” from “neutral” and the target price increased to RM3.35 from RM2.30.

By Bloomberg

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