The Gamuda-Datuk Lin Story (unfinished business?)

Datuk Lin's move to reduce his stake in Gamuda Bhd stunned market. The share price is plunging, but some analysts still reckons the company fundamentals remains intact, if not better. Who do we believe?

Facts:

(1) Datuk Lin Yun Ling reduced his interest in Gamuda from 5.23% to 1.73% through Credit Suisse (HK) Ltd
(2) Lin stated that the 70 million shares disposal was for "estate planning purpose"
(3) Lin is 2 years away from the retiring age of 55
(4) Lin, according to Gamuda press release, has committed to an 18-month lock-up period on his remaining shareholding
(5) 3 other Gamuda directors have also been disposing their equity
(6) End buyers for the disposal still unclear, but sources suggest funds from London and Europe are buying

What's in it for investors of Gamuda

(1) Consolidation of water sector will see Gamuda benefitting as it is required to part its 40% stake in SPLASH for cash (anything from RM700mil to RM1bil)
(2) It has a RM3.5bil contract to build an integrated commercial complex in Hanoi
(3) It has secured a RM2bil hydroelectric project in Laos
(4) Secured the RM12.4 billion double-tracking rail project between Ipoh and Rawang (jointly with MMC)
(5) Construction of a highway and airport in Qatar
(6) Construction of a bridge in Bahrain

How does market see the Lin's share sale?

(1) Construction sector is sleazy and needs a strong management. Lin is the figure head of Gamuda, just like Lim Goh Tong was to Genting. But Lim groomed his son as a successor before leaving, whereas Gamuda will be without a clear successor if Lin leaves. A construction company without a strong management is worrying.

(2) It was clearly documented that the Malay Chamber of Commerce was not happy that the double tracking job was not shared with its contractors. As a result, is Lin and other existing Gamuda directors under some sort of political pressure to exit? If not, will such action lead to problem securing contracts in the future?

(3) Gamuda was trading at a high multiples of over 20 times and given that the industry could be at the peak of an upcycle, wouldn't this be a good time to sell Gamuda shares for Lin, as he is only a couple years away from the official retirement age?

(4) Lin share sale was considered to be poorly structured and poorly timed. One commentor suggested that the share sale could be staggered out more gradually (perhaps 1/3, 1/3, 1/3) instead of dumping them. Having a lock-up period also suggests that Lin has only 18 months left in Gamuda. Perhaps the most unsatisfying reason for selling Gamuda shares was the vague estate planning reason given. Because few months ago, Lin insisted that Gamuda's prospect was brighter than ever. If this was the case, shouldn't Gamuda shares be good enough to leave it to his inheritance? Besides why does he need so much cash in such short space of time?

(5) Maybe there was something else which led Lin to sell. Maybe a reason if publicised could lead to a bigger sell-down by the market. Whatever it is, Lin share sale certainly makes investors uneasy.