Stock Name: GAMUDA
Company Name: GAMUDA BHD
Research House: MAYBANK
Gamuda Bhd
(Feb 2, RM3.87)
Maintain buy at RM3.81 with target price RM4.45: The formal appointment of MMC-Gamuda as the project delivery partner (PDP) for the Greater KL mass rapid transit (MRT) project puts to rest any lingering concerns on the joint-venture's (JV) role. The Cabinet had on Dec 17, 2010 given its blessing for the JV's participation. The award is positive and will potentially drive mid-term earnings. There is no change to our forecasts for now and we have already imputed a 50 sen impact from the MRT project in our RM4.45 RNAV-based target price.
MMC-Gamuda JV (50:50) had on Jan 28 received a letter of award from Syarikat Prasarana Negara Bhd (SPNB) appointing the JV as PDP for the Greater KL MRT project. The appointment will be subject to: (i) the terms of the finalised and executed project agreement between the government and SPNB, and (ii) the execution of a comprehensive and definitive agreement between the JV and SPNB.
We believe the terms of the PDP role, announced by the prime minister in December 2010, are unchanged: (i) Gamuda-MMC to be paid a fee to manage the project, taking on the delivery (timing and cost) risk, (ii) the JV is not a turnkey contractor, and the works will be awarded individually through open tender, (iii) the JV would not be allowed to tender for any works except the tunnel works, and (iv) the tunnel works will be awarded to the most competitive bid.
Unknown presently are the exact project value, MMC's and Gamuda's respective stake in the JV undertaking the PDP role, and status of the tunnel sub-contracting works. Our estimated 50 sen per share impact for Gamuda assumes: (i) a RM36 billion project value, (ii) a 50:50 JV structure, (iii) the tunnel sub-contracting works make up 30% of the RM36 billion project value, (iv) 3% gross margin for the PDP role, and 15% gross margin for the tunnelling works. This translates into 20 sen per share for the PDP role and 30 sen for the tunnel sub-contracting. ' Maybank IB Research, Feb 2
This article appeared in The Edge Financial Daily, February 7, 2011.
Company Name: GAMUDA BHD
Research House: MAYBANK
Gamuda Bhd
(Feb 2, RM3.87)
Maintain buy at RM3.81 with target price RM4.45: The formal appointment of MMC-Gamuda as the project delivery partner (PDP) for the Greater KL mass rapid transit (MRT) project puts to rest any lingering concerns on the joint-venture's (JV) role. The Cabinet had on Dec 17, 2010 given its blessing for the JV's participation. The award is positive and will potentially drive mid-term earnings. There is no change to our forecasts for now and we have already imputed a 50 sen impact from the MRT project in our RM4.45 RNAV-based target price.
MMC-Gamuda JV (50:50) had on Jan 28 received a letter of award from Syarikat Prasarana Negara Bhd (SPNB) appointing the JV as PDP for the Greater KL MRT project. The appointment will be subject to: (i) the terms of the finalised and executed project agreement between the government and SPNB, and (ii) the execution of a comprehensive and definitive agreement between the JV and SPNB.
We believe the terms of the PDP role, announced by the prime minister in December 2010, are unchanged: (i) Gamuda-MMC to be paid a fee to manage the project, taking on the delivery (timing and cost) risk, (ii) the JV is not a turnkey contractor, and the works will be awarded individually through open tender, (iii) the JV would not be allowed to tender for any works except the tunnel works, and (iv) the tunnel works will be awarded to the most competitive bid.
Unknown presently are the exact project value, MMC's and Gamuda's respective stake in the JV undertaking the PDP role, and status of the tunnel sub-contracting works. Our estimated 50 sen per share impact for Gamuda assumes: (i) a RM36 billion project value, (ii) a 50:50 JV structure, (iii) the tunnel sub-contracting works make up 30% of the RM36 billion project value, (iv) 3% gross margin for the PDP role, and 15% gross margin for the tunnelling works. This translates into 20 sen per share for the PDP role and 30 sen for the tunnel sub-contracting. ' Maybank IB Research, Feb 2
This article appeared in The Edge Financial Daily, February 7, 2011.
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