Stock Name: GAMUDA
Company Name: GAMUDA BHD
Research House: MAYBANK
Gamuda Bhd
(Nov 15, RM3.55)
Maintain buy at RM3.46 with target price of RM4.38: Gamuda's RM450 million loss in market value last Friday (down 22 sen per Gamuda share) is overdone, in our view. The share price weakness is due to the Penang government's stop-work order on the electrified double-tracking rail (EDTP) project on the Penang mainland. We think that the stopwork order is temporary, and the impact on our earnings forecasts will not be major considering that work pace on the project is already slow in the first place in light of the seasonal heavy rain. Maintain buy with a RNAV-based RM4.38 target price (TP).
The Penang government has issued a stopwork order on the EDTP effective immediately. The chief minister said that the pre-emptive move was necessary to prevent major floods as the recent floods in Kedah were possibly due to the project. The stopwork order will be effective until MMC-Gamuda provides a written guarantee that it will bear all losses should a similar problem arise on the Penang mainland, and removes any structure that causes water retention or water to overflow if flooding occurs.
The RM12.48 billion project awarded in end-2007 involves bridges, tunnels and new double-track railway lines traversing 329km across four states: Perak, Penang, Kedah and Perlis. We estimate that the track alignment on the Penang mainland comprises 16%-18% of the entire 329km stretch. Works on the entire project have crossed the half-way mark, with 49% completed as at July. Nonetheless, about 5% of the total land alignment has yet to be handed over to MMC-Gamuda as at July, which much of this land is believed to be located on the Penang mainland.
We think that the stopwork order would be restored once the year-end rainy season passes. Also, the transport minister is stepping in to explain to the Penang government that the worsening of floods (ever) in Kedah was not due to the project. We believe that the pace of work on the project overall is already slow in the first place due to the year-end rainy season. Hence, the stopwork order should not materially affect earnings. Gamuda's balance of works is about RM3.2 billion. The project has a 2013 completion deadline. ' Maybank IB, Nov 15
This article appeared in The Edge Financial Daily, November 16, 2010.
Company Name: GAMUDA BHD
Research House: MAYBANK
Gamuda Bhd
(Nov 15, RM3.55)
Maintain buy at RM3.46 with target price of RM4.38: Gamuda's RM450 million loss in market value last Friday (down 22 sen per Gamuda share) is overdone, in our view. The share price weakness is due to the Penang government's stop-work order on the electrified double-tracking rail (EDTP) project on the Penang mainland. We think that the stopwork order is temporary, and the impact on our earnings forecasts will not be major considering that work pace on the project is already slow in the first place in light of the seasonal heavy rain. Maintain buy with a RNAV-based RM4.38 target price (TP).
The Penang government has issued a stopwork order on the EDTP effective immediately. The chief minister said that the pre-emptive move was necessary to prevent major floods as the recent floods in Kedah were possibly due to the project. The stopwork order will be effective until MMC-Gamuda provides a written guarantee that it will bear all losses should a similar problem arise on the Penang mainland, and removes any structure that causes water retention or water to overflow if flooding occurs.
The RM12.48 billion project awarded in end-2007 involves bridges, tunnels and new double-track railway lines traversing 329km across four states: Perak, Penang, Kedah and Perlis. We estimate that the track alignment on the Penang mainland comprises 16%-18% of the entire 329km stretch. Works on the entire project have crossed the half-way mark, with 49% completed as at July. Nonetheless, about 5% of the total land alignment has yet to be handed over to MMC-Gamuda as at July, which much of this land is believed to be located on the Penang mainland.
We think that the stopwork order would be restored once the year-end rainy season passes. Also, the transport minister is stepping in to explain to the Penang government that the worsening of floods (ever) in Kedah was not due to the project. We believe that the pace of work on the project overall is already slow in the first place due to the year-end rainy season. Hence, the stopwork order should not materially affect earnings. Gamuda's balance of works is about RM3.2 billion. The project has a 2013 completion deadline. ' Maybank IB, Nov 15
This article appeared in The Edge Financial Daily, November 16, 2010.
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