Grana y Montero Gains Most Since 2011 on Pipeline Stake Purchase

  • Announces acquisition of stake in Peru's southern gas pipeline
  • Investment expected to generate $1 billion of new contracts

Grana y Montero SAA, Peru’s biggest builder, rose the most in four years after the company agreed to purchase a 20 percent stake in a gas pipeline in the Andean nation.

The shares surged 9.2 percent to 2.60 soles at 2:41 p.m. in Lima, the biggest gain since June 2011. Grana y Montero will spend $215 million for the stake in the operator of the pipeline, which will serve southern Peru when construction is completed. The company said the investment will generate $1 billion in new contracts.

“Investors have been hoping for some time that the company would become involved in a large project,” Marco Contreras, a senior analyst at Kallpa Securities, said in an e-mail from Lima. “It gives greater certainty about future income, and since this is an infrastructure company, it will generate stable cash flows.”

Grana y Montero Chief Executive Officer Mario Alvarado said earlier this month that investments in roads, services and sanitation will help the company boost its revenue amid a plunge in copper prices, which has fueled a contraction in investments in the Andean nation. Such deals will give Grana y Montero stable cash flows in the long term, offsetting the more cyclical construction business, Alvarado said.

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