Stock Name: GAMUDA
Company Name: GAMUDA BHD
Research House: AMMB
Gamuda Bhd
(June 25, RM3.24)
Maintain buy at RM3 with fair value at RM3.82: Gamuda reported 3QFY10 net profit of RM73 million, taking 9MFY10 earnings to RM204 million. Results were in line with our expectations which accounted for 76% of our full-year forecast but only 69% of consensus.
Net profit for the first nine months of FYT10F rose 36% year-on-year (y-o-y) thanks to better contributions from both its construction as well as property divisions. Gamuda's earnings performance could have been better if not for some one-off adjustments to the amortisation policy of 30%-owned toll unit ' Kesas ' due to a lowering of its traffic projections.
Restoration of construction margins is gaining traction ' rising to 5.2% in 3QFY10 against 4.3% in 2QFY10 (9MFY10: 4%) as working progress on the double-tracking projects comes into full swing.
The big call for Gamuda in the near term would centre on the proposed MRT project which is central to Malaysia's RM50 billion plan to integrate and upgrade Klang Valley's public transportation system.
We think the MRT project has a good chance of taking off.'' The proposal has been included under the 10MP and is in line with the Malaysian government's plans for a gradual phase-out of petrol subsidies.
The project is at the advanced stage of evaluation at the federal level where a decision could be known by year-end (targeted commencement of construction works early-2011). To be sure, the federal government has frozen new development permits for areas that have been identified within the MRT routes.
Including the existing LRT system works, construction works are estimated at RM43 billion of which 30% would be tunnelling works. The MRT system would take up to eight years to complete. We believe the Gamuda-MMC joint-venture (JV) is a strong contender for the tunnelling works package worth RM13 billion given its track record in undertaking the STORM. Gamuda is also the sole Malaysian contractor to date to have delivered an MRT system in Kaoshiung, Taiwan.
Based on a 50% share of the tunnelling works and a net margin of 10%, this contract should potentially lift Gamuda's fair value by 26 sen or 7% to RM4.08 per share and double its outstanding order book to RM13 billion. We are maintaining our buy rating on Gamuda with an unchanged fair value of RM3.82 per share based on a 5% discount to its sum-of-parts (SOP) value of RM4.03 per share ' AmResearch, June 25
This article appeared in The Edge Financial Daily, June 28, 2010.
Company Name: GAMUDA BHD
Research House: AMMB
Gamuda Bhd
(June 25, RM3.24)
Maintain buy at RM3 with fair value at RM3.82: Gamuda reported 3QFY10 net profit of RM73 million, taking 9MFY10 earnings to RM204 million. Results were in line with our expectations which accounted for 76% of our full-year forecast but only 69% of consensus.
Net profit for the first nine months of FYT10F rose 36% year-on-year (y-o-y) thanks to better contributions from both its construction as well as property divisions. Gamuda's earnings performance could have been better if not for some one-off adjustments to the amortisation policy of 30%-owned toll unit ' Kesas ' due to a lowering of its traffic projections.
Restoration of construction margins is gaining traction ' rising to 5.2% in 3QFY10 against 4.3% in 2QFY10 (9MFY10: 4%) as working progress on the double-tracking projects comes into full swing.
The big call for Gamuda in the near term would centre on the proposed MRT project which is central to Malaysia's RM50 billion plan to integrate and upgrade Klang Valley's public transportation system.
We think the MRT project has a good chance of taking off.'' The proposal has been included under the 10MP and is in line with the Malaysian government's plans for a gradual phase-out of petrol subsidies.
The project is at the advanced stage of evaluation at the federal level where a decision could be known by year-end (targeted commencement of construction works early-2011). To be sure, the federal government has frozen new development permits for areas that have been identified within the MRT routes.
Including the existing LRT system works, construction works are estimated at RM43 billion of which 30% would be tunnelling works. The MRT system would take up to eight years to complete. We believe the Gamuda-MMC joint-venture (JV) is a strong contender for the tunnelling works package worth RM13 billion given its track record in undertaking the STORM. Gamuda is also the sole Malaysian contractor to date to have delivered an MRT system in Kaoshiung, Taiwan.
Based on a 50% share of the tunnelling works and a net margin of 10%, this contract should potentially lift Gamuda's fair value by 26 sen or 7% to RM4.08 per share and double its outstanding order book to RM13 billion. We are maintaining our buy rating on Gamuda with an unchanged fair value of RM3.82 per share based on a 5% discount to its sum-of-parts (SOP) value of RM4.03 per share ' AmResearch, June 25
This article appeared in The Edge Financial Daily, June 28, 2010.
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