Stock Name: GAMUDA
Company Name: GAMUDA BHD
Research House: RHB
Gamuda Bhd
(June 15, RM2.96)
Maintain underperform at RM2.95 with fair value of RM2.74: Taking the cue from the improved construction margins recorded by peers IJM and WCT in their just-released January-March 2010 results, we expect Gamuda's 3QFY10 results, due out by the end of the month, to come in roughly within expectations.
We expect Gamuda's 3QFY10 core net profit to come in at RM80 million-RM85 million, vis-a-vis RM68 million recorded in 2QFY10. Cumulatively, 9M net profit of RM211 million-RM216 million is equivalent to 76%-78% of our full-year forecast and 70%-72% of the full-year market consensus.
At RM211 million-RM216 million, net profit in 9MFY10 will have grown 40%-44% year-on-year (y-o-y), in line with our full-year projection of 43%, premised upon a strong recovery in construction margins that appears to have begun to show in the sector.
Over the last three months, IJM's construction profit before tax (PBT) margin recovered from 2.2% to 3.1% while WCT's construction Ebit margin (adjusted for inter-company elimination) jumped from 0.8% to 12% as cost pressure eased.
Forecasts maintained. Risks to our view include: (1) new construction contracts secured coming in above our target of RM1 billion per annum in FY10-11; and (2) a stronger-than-expected recovery in construction margins.
We are neutral on the construction sector. On one hand, we foresee improved investors' risk appetite for construction stocks following: (1) the massive underperformance of the sector vis-a-vis the market in 4Q2009 and 1H2010; and (2) a better sector news flow and new expectations on the heels of the announcement of the 10th Malaysia Plan (10MP).
On the other hand, certain negative elements remain such as: (1) the still slow pace of the roll-out of public projects, a highly competitive market and declining dominance of established players in large-scale projects locally; and (2) the not-so-rosy outlook and increased operating risks in key overseas markets.
Maintain underperform as upside exhausted. Indicative fair value is RM2.74, valuing its operations ex-Vietnam at 14 times fully diluted CY11 EPS of 15.7 sen, in line with our benchmark one-year forward target PER of 10-14 times for the construction sector, and its two property projects in Vietnam based on a 30% discount to their NPV, translating to 54 sen per Gamuda share on a fully-diluted basis. ' RHB Research Institute, June 15
This article appeared in The Edge Financial Daily, June 16, 2010.
Company Name: GAMUDA BHD
Research House: RHB
Gamuda Bhd
(June 15, RM2.96)
Maintain underperform at RM2.95 with fair value of RM2.74: Taking the cue from the improved construction margins recorded by peers IJM and WCT in their just-released January-March 2010 results, we expect Gamuda's 3QFY10 results, due out by the end of the month, to come in roughly within expectations.
We expect Gamuda's 3QFY10 core net profit to come in at RM80 million-RM85 million, vis-a-vis RM68 million recorded in 2QFY10. Cumulatively, 9M net profit of RM211 million-RM216 million is equivalent to 76%-78% of our full-year forecast and 70%-72% of the full-year market consensus.
At RM211 million-RM216 million, net profit in 9MFY10 will have grown 40%-44% year-on-year (y-o-y), in line with our full-year projection of 43%, premised upon a strong recovery in construction margins that appears to have begun to show in the sector.
Over the last three months, IJM's construction profit before tax (PBT) margin recovered from 2.2% to 3.1% while WCT's construction Ebit margin (adjusted for inter-company elimination) jumped from 0.8% to 12% as cost pressure eased.
Forecasts maintained. Risks to our view include: (1) new construction contracts secured coming in above our target of RM1 billion per annum in FY10-11; and (2) a stronger-than-expected recovery in construction margins.
We are neutral on the construction sector. On one hand, we foresee improved investors' risk appetite for construction stocks following: (1) the massive underperformance of the sector vis-a-vis the market in 4Q2009 and 1H2010; and (2) a better sector news flow and new expectations on the heels of the announcement of the 10th Malaysia Plan (10MP).
On the other hand, certain negative elements remain such as: (1) the still slow pace of the roll-out of public projects, a highly competitive market and declining dominance of established players in large-scale projects locally; and (2) the not-so-rosy outlook and increased operating risks in key overseas markets.
Maintain underperform as upside exhausted. Indicative fair value is RM2.74, valuing its operations ex-Vietnam at 14 times fully diluted CY11 EPS of 15.7 sen, in line with our benchmark one-year forward target PER of 10-14 times for the construction sector, and its two property projects in Vietnam based on a 30% discount to their NPV, translating to 54 sen per Gamuda share on a fully-diluted basis. ' RHB Research Institute, June 15
This article appeared in The Edge Financial Daily, June 16, 2010.
No comments:
Post a Comment