Gamuda tumbles 13pc

GAMUDA Bhd led shares of Malaysian property developers lower in Kuala Lumpur trading on concern their sales in Vietnam will be eroded by higher borrowing costs.

Gamuda, Malaysia's second-biggest builder by stock market value, tumbled 13 per cent to RM2.60 at 12.30 pm. Berjaya Land Bhd lost 5.7 per cent, while SP Setia Bhd, whose only overseas projects are in Vietnam, dropped 4.3 per cent.

Malaysian developers have increased investments in Vietnam, where the economy grew at the fastest pace in a decade last year. Gamuda's projects include the Yen So Park in Hanoi, a development of offices, luxury apartments and a convention center that the company values at US$1 billion.

"There may be de-ratings coming in on these property projects," said Jason Lee, who helps oversee the equivalent of US$2.1 billion as general manager of equities at Amanah Raya-JMF Asset Management in Kuala Lumpur. "Nobody really knows the impact. These property companies have some fairly big exposure."

Vietnam's central bank raised its key interest rate to 12 per cent on May 17 and the country is heading for a "currency crisis" because the bank has kept the dong too strong as inflation soars, Morgan Stanley said on May 28.

Citigroup Inc cut its target price for Gamuda 14 per cent to RM2.57, turning more cautious on the company's venture in Vietnam, analyst Choong Wai Kee said in a report today. He maintained his "sell" rating on the stock. Gamuda is based in Petaling Jaya, outside the Malaysian capital.

Ho Chi Minh Projects

SP Setia, Malaysia's biggest property developer, said on April 16 it plans to invest US$100 million in Vietnamese projects that may generate as much as 30 per cent of the company's profit and sales in three years.

Puchong, Malaysia-based SP Setia last year began developing the 558.4-acre (226-hectare) EcoLakes project in My Phuoc, 40 kilometers (25 miles) north of Ho Chi Minh City. The company also plans to develop 79 acres of land in Ho Chi Minh City.

SP Setia fell 18 sen to RM4.02, headed for the largest drop since April 3. Berjaya Land declined 30 sen to RM5, set for the biggest fall since March 10.

Berjaya Land said on February 14 it plans a debt sale that may raise RM875 million (US$270 million) to help expansion in Vietnam. The company said in December that the projects may generate sales of RM31.1 billion.

By Bloomberg