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Wednesday, August 26, 2009

Sunway bidding for deals worth US$5.7b

Sunway Holdings is bidding for foreign and local contracts worth about US$5.7 billion (RM20 billion) as big spending plans by governments boost construction activity globally.

"Including what we are going to bid, it's about RM20 billion," managing director Yau Kok Seng said on Monday.

"Our past track record (for successful bids) is about 10 per cent, which means over the next six to 12 months, we should be able to win at least RM2 billion (worth of jobs)," Yau said in an interview.

Sunway has submitted bids for construction jobs worth about RM1 billion in India. The company, the seventh-largest builder in the country with market value of US$224 million (RM785 million), is also confident of obtaining repeat jobs within the US$25 billion (RM87.75 billion) Arzanah Development in Abu Dhabi.
"We have been shortlisted to tender for Phase 2 which will be launched in the near future," said Yau.

In May, Sunway said 75 per cent-owned Sunway Construction has been awarded a RM326 million contract for the Arzanah Development.

In Malaysia, the company is bidding for jobs under a multi-billion ringgit low-cost carrier terminal project, said Yau.

Construction stocks are the best performers on the local bourse so far this year, as investors bet that massive government pump-priming will boost builders' earnings.

Malaysia has one of Asia's largest stimulus plans, worth RM67 billion.

The government is expected to launch later this year major infrastructure projects including a light rail line extension and the RM2 billion low-cost carrier terminal project.

Shares in Sunway have more than doubled so far this year, outpacing its larger rivals such as Gamuda and WCT. The Kuala Lumpur Construction Index, made up of 42 stocks, has risen 36 per cent.

Sunway, which also has interests in property development and quarrying, is one of three bidders for German cement maker HeidelbergCement's Malaysian assets.

HeidelbergCement is looking to sell the Malaysian assets, which have also drawn interest from private equity firms, for at least US$250 million (RM877 million), two sources said in June.

"They have not officially informed us yet, but we should know soon," said Yau. The potential acquisition is not expected to stretch Sunway's balance sheet as it seeks to further reduce debts by selling off non-core assets, he said.

"The way we structure the acquisition, there is a minimum capital requirement," he said.

Sunway wants to cut its gearing ratio to 0.5 times over the next two years from about 0.8 times currently, said Yau.

"Although it's our vision to regain our pole position (in the quarry business), we are not keen to compete with someone who's prepared to pay (a) ridiculous price," said Yau when asked if he was confident of securing the assets.

By Reuters

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