Gamuda is expected to benefit from the rollout of several rail-based mega projects.
KUALA LUMPUR: AmInvestment Research is maintaining its Buy call for Gamuda and it is also retaining its forecasts and sum-of-parts based fair value of RM5.96.
It said on Wednesday this values Gamuda's construction business at 16 times CY18 net profit, in line with its benchmark one-year forward P/E of 14 to 16 times for large-cap construction stocks.
“Gamuda's 9MFY17 results met expectations at 75% and 71% of our full-year forecast and the full-year consensus estimates respectively.
“Overall, its 9MFY17 net profit only grew 5% on-year as stronger construction profits were partially offset by weaker property profits and a higher effective tax rate.
Gamuda guided for RM10bil new construction job wins over the next 12 months “from the rollout of several rail-based mega projects” which AmInvestment Research believes include the LRT3, East Coast Rail Link (ECRL), KL-Singapore high-speed rail (HSR) and MRT3.
On the other hand, Gamuda said that it is no longer pursuing the Gemas – Johor Bahru double tracking. Our forecasts conservatively assume Gamuda would secure RM2bil new jobs annually in FY17-19F. Its construction order backlog stands at RM8.2bil at present.
“Gamuda is on track to beat its property sales target of RM2.12bil in FY17. For 9MFY17, it already clocked up RM1.4bil sales largely due to strong showing from overseas (particularly, Vietnam and Singapore) which contributed to about 55% of total sales,” it said.
AmInvestment Research noted that Gamuda stated it is likely to end FY17 with about RM2.5bil sales thanks to the maiden contribution from its newly launched RM6.9bil Gamuda Gardens in Rawang.
“Our forecasts already assume a recovery in Gamuda’s property profits from FY18.
“Gamuda is the best proxy to the booming construction sector in Malaysia given its dominant roles in the MRT (as the project delivery partner (PDP) and tunneling contractor), and potentially in other mega rail-based projects in the pipeline such as the LRT3, ECRL, KL-Singapore HSR,” the research house said.
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