Stock Name: GAMUDA
Company Name: GAMUDA BHD
Company Name: GAMUDA BHD
| Research House: OSK | Price Call: BUY | Target Price: 4.57 |
Gamuda's 1HFY12 earnings of RM268.8m (+47.2% y-o-y) were inline with both our and consensus forecasts, making up 51.5% and 54.5% of therespective full-year estimates. Overall, we are encouraged by the progress inits execution of the KV MRT project after jointly clinching the tunnellingportion of the SBK line with MMC. We are now looking forward to more news onthe Gemas-Johor Bahru EDT in 3Q12 worth an estimated RM8bn. Maintain BUY, withour SOP-based FV unchanged at RM4.57.
On a roll. Gamuda's 1HFY12 revenue came in at a sturdy RM1.41bn (+13.7% y-o-y) driven by itsproperty division, which saw revenue soar 68.6% during the period to RM520.9m. The group's core earnings surged bya stronger 47.2% to RM268.8m owing to margin expansion in its construction andproperty divisions, both of which witnessed a 620bps improvement in PBTmargins. We attribute these improvementsto the recognition of better margins for its Electrified Double Tracking (EDT)project as it had been rather conservative for FY09-FY10, as well as sales of higher-end property developmentslast year. On a quarterly basis, the 2QFY12 numbers improved markedly acrossthe board on a y-o-y and q-o-q comparison.
What's new on theMRT. Management said that 27 works packages for the Klang Valley My Rapid Transit (KV MRT) Sungai Buloh-Kajang (SBK) linehave been awardedout, while tenders and awards for the remaining 63 packagesare expected to be mostly completed by 4Q12. We understand that works on thetunnelling portion could start as soon as 3Q12, and the Government is currentlynegotiating with landowners on vacating the affected sites. The target date forcompletion is July 2017. Ten tunnel boring machines, each worth some RM150m,will be deployed at 4 launch shafts in core areas such as Semantan, Maluri andCochrane.
Recognizing works onelevated portion. More interestingly, management highlighted that allpackages for the elevated portion of the SBK line will be recognized in itsbooks in view of its joint appointment with MMC as the Project Delivery Partner(PDP) for this portion. To put it simply, Gamuda's revenue going forward wouldinclude all works relating to the elevated portion, plus the 6% management feeit is entitled to, while its operating expenses would comprise payments made to the respective contractors for the works involved. While this would no doubtdistort its margins going forward, we are not overly concerned as long as there is proper execution to ensure the timely completion of the SBK line, whichwill in turn ensure that Gamuda pockets its 50% share of the RM720m managementfee due. We are making no changes to our revenue and opex forecasts for now,pending more clarity on the accounting policies involved, as well as furtherassurance on the progress of implementation.
Source: OSK188
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