Published December 17, 2008

Gamuda expects first profit fall in 2 yrs

Mid-East sales won't offset project delays in Malaysia, Vietnam

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(KUALA LUMPUR) Gamuda Bhd, Malaysia's second- biggest builder by market value, said its fiscal first-quarter profit may fall for the first time in more than two years because of delays to projects in Vietnam and Malaysia.

Profit for the year ending July 2009 will also be 'somewhat lower,' managing director Lin Yun Ling told reporters yesterday in Shah Alam, west of Kuala Lumpur. The company, scheduled to announce quarterly earnings today, may also pay a lower dividend this year, he said.

'Worldwide, things are going to be quite bad,' Mr Lin said, after the company's annual general meeting. 'We do have to batten down the hatches and have some defensive measures in place.'

Gamuda, based in Selangor, joins the nation's biggest companies including Sime Darby and Malayan Banking in forecasting lower earnings amid the global financial crisis. Profit will fall because Middle East sales won't compensate for the delays in Vietnam and Malaysia, Mr Lin said.

In Peninsular Malaysia, where the company is building a RM12.5 billion (S$5.2 billion) railway development, delays to the acquisition of land in Penang state has added a year to the five-year project, Mr Lin said. In Vietnam, some investors have had difficulties in raising funds to buy portions of the commercial development, he said.

Gamuda stock has lost 61 per cent this year, trailing the 41 per cent decline on Malaysia's main stock index. The shares fell 1.6 per cent or 3 sen to close at RM1.82 yesterday.

Yen So Park Gamuda is building the Yen So Park in Hanoi, a cluster of offices, apartments and a convention centre.

The value of the entire project in Vietnam is RM8 billion to RM10 billion over a period of about 10 years to 12 years, Mr Lin said.

The delays won't necessarily hurt the value of the project because the properties may fetch higher prices when the global economy recovers, Mr Lin said. He said he is 'happy' with the level of interest from investors in the Hanoi development.

Sales this fiscal year will rise because of revenue from the Middle East. The company is building highways and an airport in Qatar and bridges in Bahrain, Mr Lin said.

Gamuda last reported a drop in quarterly profit in the three months ended July 2006, according to data compiled by Bloomberg. The company's fourth-quarter profit climbed 50 per cent to RM70.2 million. -- Bloomberg