Monday, October 8th, 2018

 

US worried about China currency depreciation, says official

WASHINGTON, Oct 8 — The United States remains concerned about the weakening of China’s currency and the trade imbalances but Treasury Secretary Steven Mnuchin has no meetings scheduled with negotiators from Beijing this week, US officials said…


UK union calls on its Uber drivers to strike tomorrow

LONDON, Oct 8 — A British trade union called on Uber drivers to strike in London, Birmingham and Nottingham tomorrow for 24 hours by not signing into the app, in a push for higher fares and more working rights. Uber has around 60,000 drivers in…


MMC Gamuda says 20,000 jobs at stake, invites govt to come back to negotiation table over MRT2

PETALING JAYA: MMC Corp Bhd and Gamuda Bhd Joint Venture (MMC Gamuda) is asking the government to reconsider its decision to terminate the underground works contract for Mass Rapid Transit 2 (MRT2) citing exposure to a flood of lawsuits, the loss of more than 20,000 jobs and a review by a local engineering consulting firm which lacked the relevant experience to do so.

In an invitation to the government to come back to the negotiation table, the group suggested that an international engineering consulting firm with the relevant experience be appointed to carry out an objective review looking into all reasonable engineering and technical requirements, to re-examine components from where savings could be derived and narrow the differences.

MMC Gamuda said the Finance Ministry's belief that it could offer more reduction for the underground works is premised on the review by a local engineering consulting firm, of which a significant part was refuted by MMC Gamuda on technical grounds, for lack of relevant experience and being too simplistic.

“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 2018, which carried similar views as MMC Gamuda,” it said in a statement released today.

MMC Gamuda had offered to reduce the uncompleted underground works portion of RM9.6 billion by RM2.3 billion following two months of negotiations. This was by reducing the scope of works and lowering specifications for mechanical, electrical and architectural finishes of the stations and reducing the number of entrances to stations and the number of stations constructed, from 10 to six.

In explaining the factors influencing the underground works contract pricing, the group said it was largely due to MRT Corp's and safety requirements.

MMC Gamuda said MRT Corp's requirements increased the work scope significantly compared with MRT1, while the high risk of sinkholes from tunnelling led to it having to meet extremely stringent risk management requirements in order for insurers to insure the project for MRT Corp.

The group said a termination at this point, when it has completed 40% of works, would unjustifiably expose it to a flood of lawsuits for compensation from terminated employees, sub-contractors, suppliers and manufacturers, among others. It would also mean immediate job losses to a workforce 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 JV staff, and of this, more than 60% are bumiputra. This will cause unnecessary hardship to a significant number of the Malaysian workforce in an already slowing market.”

Considering that the Finance Ministry's requirement for the retendering is for foreign contractors, these jobs will only be given to a foreign contractor who in turn will use experienced staff from its own country.

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 prequalification requirements with only five contractors prequalified by MRT Corp to tender, of which MMC Gamuda was the only local bidder.

The bids were evaluated by the Reference Design Consultant, Arup Singapore Pte Ltd, appointed by MRT Corp. MMC Gamuda's bid had the highest technical score and offered the lowest price, below even the pretender estimate prepared by Arup Singapore.

MRT Corp in a separate statement said it accepts and welcomes the government's decision to switch the model from project delivery partner to turnkey contractor for the elevated portion of MRT2 while terminating the current contractor for underground works, and for it to be retendered.

Elevated works are 30% complete, and underground works 39%. The cost rationalisation exercise does not involve reducing the planned number of elevated stations, which is 24.


Construction stocks crumble on news of MRT2 undergound works retender

PETALING JAYA: Construction stocks were spooked today by news of the retendering of MRT2 underground contract, with Gamuda Bhd, part of MMC Gamuda Joint Venture appointed as project delivery partner (PDP) for the mega project, seeing the steepest drop of as much as 24.3%.

Gamuda's share price hit a multi-year low of RM2.32 on concerns over the erosion of earnings as a result of the construction cost cut. At market close, it skidded 78 sen or 24.3% to RM2.43 on active trading of 92.7 million shares. Six of its warrants fell between 18.4% and 71.4%.

The share price of the other half of the joint venture, MMC Corp, sank as much as 23 sen or 17% to RM1.12 before closing 22 sen or 16.3% lower at RM1.13 on 6.92 million shares done.

Short selling of Gamuda and MMC shares was suspended today due to heavy selling pressure.

Overall, the construction index tumbled 19.53 points or 10.1% to 174.59 points. IJM Corp Bhd and Sunway Construction Bhd lost 10.6% and 10.9% to RM1.60 and RM1.56, respectively.

Analysts downgraded Gamuda's earnings by up to 30% after the sizeable cut in MRT2's construction cost.

PublicInvest Research said as the underground portion of MRT2 constitutes RM5.5 billion or 92% of Gamuda's RM6 billion outstanding order book, it will adversely impact Gamuda's construction earnings in the near term, in the absence of new jobs.

It, however, is not discounting the possibility of Gamuda once again bidding for the underground contracts which could spell cost advantages to the group as it already has the boring machines and project knowledge.

PublicInvest Research cut Gamuda's FY19-21 earnings by 30%, 21% and 20% respectively with a revision in target price to RM3 from RM3.80 while maintaining a “neutral” call on the stock.

AmInvestment Bank Research slashed its net profit forecasts for FY19-21 by 16%, 15% and 14% respectively for Gamuda.

The stock has been downgraded to “underweight” with a lower fair value of RM2.71 from RM3.34.

The research house also raised the question of whether the termination is an isolated event or could it leave a dent on Gamuda's prospects of winning major government contracts in future.

AmInvestment Bank Research is also cautious on the outlook of the local construction sector as the government cuts back on public infrastructure projects on grounds of fiscal prudence.

Should Gamuda fail to secure the retendered portion of the underground portion, CIMB Research estimates an 18% to 20% downside to its FY19-21 earnings per share forecasts.
The research house added that the latest development could impact other MRT civil contractors such as IJM, Sunway Construction, WCT and MRCB.


Ministry to review bumiputra quota for housing projects

KUALA LUMPUR: The Housing and Local Government Ministry will study the bumiputra quota for housing projects and its release mechanism as housing developers have long lamented the burden of unsold bumiputra units.

Housing and Local Government Minister Zuraida Kamaruddin understood that some states even have a bumiputra quota as high as 70%. Currently, different states impose different bumiputra quotas (between 30% and 70%) for housing projects.

“I can understand what they (housing developers) are talking about but I have to get the figures and study the trend before I can come out with the policy on that,” she told a press conference after an industry-government open dialogue hosted by the Asian Strategy & Leadership Institute (Asli) here today.

Housing developers are appealing that by the time the certificate of completion and compliance is given, whatever unsold bumiputra units must be released into the market. Any unsold bumiputra unit is a cost to the developer, who needs to pay interest to the bank, adding on to total costs, not to mention the absence of interest from bumiputras due to various reasons.


Jaguar Land Rover to shut Solihull plant for two weeks as Chinese sales slump

LONDON, Oct 8 — Britain’s biggest carmaker Jaguar Land Rover will close its Solihull plant for two weeks later this month after it reported a nearly 50 per cent fall in sales to China as import duties and a trade war with the United States hurt…


Wall Street slightly lower as tech stocks, oil weigh

NEW YORK, Oct 8 — US stock indexes were lower today, pressured by a drop in technology and energy companies and muted appetite for equities after last week’s spike in Treasury yields following healthy economic data. Six of the 11 major S&P…


Reach Energy starts drilling in Kariman

PETALING JAYA: Reach Energy Bhd’s has started drilling first exploration well in Kazakhstan-based Kariman field as part of its Emir-Oil’s exploration commitment.

The group told the stock exchange that the Kariman #16 vertical exploration well was spud on Oct 6, targeting a highly graded hydrocarbon trap which was identified to being in close proximity to the west flank of Kariman field.

“It is expected that this well will confirm larger extent of the hydrocarbon resource exploited in the Kariman structure.”

Additionally, this exploration well will augment the geological understanding of the prolific trend and support further exploration efforts,” it added.

The expected success of this exploration well would increase the group’s Proved plus Probable (2P) reserves by a significant amount.

One of Reach Energy’s specific target is to confirm the maximum depth of the oil accumulation thus reducing uncertainty in resource calculations.

The well will penetrate the Middle Triassic carbonate reservoirs, specifically T2A, T2B, and T2C.

It has a total depth (True Vertical Depth Subsea, TVDSS) of 3937 m and total drilling duration is expected to be 120 days.

“Our advanced drilling program will be undertaken by a mix of local and international reputable service providers such as Sinopec, AsiaPetroService, Drill-Lab Kazakhstan, and KazPromGeofizika,” it added.

Reach Energy fell 10.53% to 42.5 sen with 38.24 million shares done today.


T7 Global ventures into retail segment

PETALING JAYA: T7 Global Bhd is expanding into the retail segment through the incorporation of a sub-subsidiary company known as T7 Generations Sdn Bhd.

The group said it received today the notice of registration pursuant to Section 15 of the Companies Act 2016 dated Oct 8 from the Companies Commission of Malaysia on the incorporation of T7 Generations with a share capital of RM200.

The intended principal activity of T7 Generations is to be involved in retail sale of articles of clothing, articles of fur, clothing accessories, footwear and other retail sale of new goods in specialised stores.

The incorporation of T7 Generations is funded by internal funds.


TUI group to set up office in Malaysia

KUALA LUMPUR, Oct 8 — TUI Group, one of the world’s largest tour operators, has been given the nod to set up its own travel agency in Malaysia. The Germany-based company received the inbound, outbound and ticketing licences from the Tourism,…