Stock Name: GAMUDA
Company Name: GAMUDA BHD
Research House: MAYBANK
Gamuda Bhd
(March 10, RM3.75)
Maintain buy at RM3.76 with target price RM4.45: Results for 2QFY11 should at least meet our forecast of 26% growth in FY11 net profit. The quarter may however feature a US$30 million (RM91 million) impairment for Yen So Park due to the devalued Vietnamese dong, but this will likely be a balance sheet item. The construction business remains unperturbed by the turmoil in the Middle East and North Africa, with full focus this year on the Kuala Lumpur/Klang Valley Mass Rapid Transit (MRT) project. Gamuda remains a 'buy' as a beneficiary/enabler of the Economic Transformation Programme, with an 18% upside potential to our realisable net asset value-based target price.
Results for 2QFY11, to be released on March 24, should at least meet our RM355 million net profit forecast for FY11. Gamuda delivered RM88.5 million in net profit in 1QFY11 (+11% year-on-year, +16% quarter-on-quarter), which made up 25% of our full-year forecast. The sequential quarterly earnings uptrend, which started in 4QFY09, may continue into 2QFY11 as major construction projects, like the double-tracking rail project, have entered matured phases. Margins should at least sustain. We maintain our earnings forecasts.
Route alignment for the first track, Sungai Buloh-Kajang, has been opened for public comment until mid-May. While the prime minister retains the July deadline for construction to start, we think the work progress will not be meaningful this year due to land acquisition and alignment issues. The construction value should have risen by approximately 30% based on higher material prices. The underground works portion, where MMC Gamuda Joint Venture Sdn Bhd could feature as a contractor, could be worth about RM6 billion. The works have not been reflected in our earnings forecasts for Gamuda.
Gamuda has completed the Sitra Bridge (Bahrain), and its only work exposure in the Middle East now is the New Doha International Airport contract (Qatar) with circa RM200 million worth of works outstanding. Collections for the Sitra Bridge job have been progressively forthcoming. On the other hand, the dong, which has devalued by 25.7% since 2008 (9.3% on Feb 11) will impact its financials with a likely US$30 million impairment in the retained earnings (4.5 sen book value of equity per share), to be reflected in the upcoming 2QFY11 results. ' Maybank IB Research, March 10
This article appeared in The Edge Financial Daily, March 11, 2011.
Company Name: GAMUDA BHD
Research House: MAYBANK
Gamuda Bhd
(March 10, RM3.75)
Maintain buy at RM3.76 with target price RM4.45: Results for 2QFY11 should at least meet our forecast of 26% growth in FY11 net profit. The quarter may however feature a US$30 million (RM91 million) impairment for Yen So Park due to the devalued Vietnamese dong, but this will likely be a balance sheet item. The construction business remains unperturbed by the turmoil in the Middle East and North Africa, with full focus this year on the Kuala Lumpur/Klang Valley Mass Rapid Transit (MRT) project. Gamuda remains a 'buy' as a beneficiary/enabler of the Economic Transformation Programme, with an 18% upside potential to our realisable net asset value-based target price.
Results for 2QFY11, to be released on March 24, should at least meet our RM355 million net profit forecast for FY11. Gamuda delivered RM88.5 million in net profit in 1QFY11 (+11% year-on-year, +16% quarter-on-quarter), which made up 25% of our full-year forecast. The sequential quarterly earnings uptrend, which started in 4QFY09, may continue into 2QFY11 as major construction projects, like the double-tracking rail project, have entered matured phases. Margins should at least sustain. We maintain our earnings forecasts.
Route alignment for the first track, Sungai Buloh-Kajang, has been opened for public comment until mid-May. While the prime minister retains the July deadline for construction to start, we think the work progress will not be meaningful this year due to land acquisition and alignment issues. The construction value should have risen by approximately 30% based on higher material prices. The underground works portion, where MMC Gamuda Joint Venture Sdn Bhd could feature as a contractor, could be worth about RM6 billion. The works have not been reflected in our earnings forecasts for Gamuda.
Gamuda has completed the Sitra Bridge (Bahrain), and its only work exposure in the Middle East now is the New Doha International Airport contract (Qatar) with circa RM200 million worth of works outstanding. Collections for the Sitra Bridge job have been progressively forthcoming. On the other hand, the dong, which has devalued by 25.7% since 2008 (9.3% on Feb 11) will impact its financials with a likely US$30 million impairment in the retained earnings (4.5 sen book value of equity per share), to be reflected in the upcoming 2QFY11 results. ' Maybank IB Research, March 10
This article appeared in The Edge Financial Daily, March 11, 2011.
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