By RHB Research
Rating: Buy (maintained)
Target price: RM5.80
RHB Research remains optimistic on Gamuda despite the selldown of its shares amid news that that the project owner for mass rapid transit line 3 (MRT3), Prasarana Malaysia, had elected for a design-finance-build instead of the project delivery partner (PDP) model used in its previous projects.
The research house noted that the group’s share price had retreated by 9% over the past few months, fuelled by the news.
Gamuda’s joint-venture company had been appointed as PDP for the previous MRT1 and MRT2 projects.
“Nevertheless, we remain optimistic on the company’s prospects despite the aforementioned setback, as we opine that it remains a strong contender in securing the PDP role for the bigger-scale Kuala Lumpur-Singapore high-speed rail project, given its successful stint as PDP for MRT1.
“Apart from that, the east coast rail link and MRT3 mega projects offer ample subcontract and underground-related work opportunities to keep the company busy,” it said in a note.
The research house has maintained its “buy” call on the counter as well as its target price of RM5.80.
It said the firm was its top pick among large-cap construction companies, as it viewed Gamuda as a key proxy to major infrastructure projects in the country.
“In addition, Gamuda’s property division has been registering healthy earnings growth while its concession businesses provide defensive earnings and steady streams of cashflow.
“We are of the opinion that the current low market expectations and share price pullback represents a good opportunity for investors to accumulate the stock,” it said.
Gamuda currently trades at a rolling 12-month forward price-earnings ratio of only 13.9 times, below its five-year mean of 14.7 times.
RHB Research said this is unjustified, given its large outstanding orderbook and ability to secure new job wins.
By Maybank IB Research
Target price: RM3
Bison Consolidated Bhd is now known as Mynews Holdings following a name change with effect from Dec 11, 2017.
Maybank Investment Bank Research said the group’s results for the fourth quarter of financial year 2017 (FY17) were in line and store openings were largely on track, having opened 62 stores in FY17 versus its internal target of 70 stores.
The retail player’s fourth quarter FY17 core net profit at RM5mil, which is an increase of 25% year-on-year (y-o-y) and a decline of 14% quarter-on-quarter, took FY17 core net profit to RM24mil.
The group’s FY17 revenue grew 24% y-o-y, on increased contributions from new and maturing stores.
Except for print media, the research house noted that all other product categories grew y-o-y. The group’s FY17 gross margin improved to 36.7% on better sales mix, gains from economies of scale and higher marketing income.
However, FY17 administrative expenses were higher, up 26% y-o-y, in line with higher number of stores, staff and advertising and promotions.
“As expected, no dividend was declared in the quarter,” the research house noted.
It adjusted its earnings forecast for FY18 and FY19 upwards by 4% and 1%, largely on housekeeping adjustments and a lower tax rate assumption for its MSC-status subsidiary
The research house maintained its “hold” call on the counter with a higher target price of RM3.
It is assuming net store openings of 75, 70, and 70 outlets for for FY18, FY19 and FY20, respectively.
By Kenanga Research
Rating: Market perform
Target price: RM8.43
KENANGA Research is “neutral” on Scientex’s plan to increase its land bank in Johor as it does not expect significant impact to earnings in the near term.
Due to minimal historical references, the research house said it was unable to derive a direct comparison for the land.
However, historical transactions for mixed land titles at Mukim Pulai ranges from RM43-RM62 per sq ft.
Based on its assumptions of affordable residential units and a mixed development township as well as price per unit of RM400,000 on 14 units per acre, the research house has derived a potential gross development value (GDV) of RM1.9bil and land cost to GDV of 15.1%, which it deem as “decent”.
It, however, noted that land cost could increase on conversion premiums (from agricultural land to commercial) and re-zoning.
As project details are still pending finalisation of development plans and potential GDV, land cost to GDV may change subject to the residential-to-commercial mix and pricing strategies, it said.
“We were fairly surprised by management’s move to further increase land bank in Johor despite the slow Johor property market, and are neutral on the exercise as we do not expect significant impact to earnings in the near term,” the research house said.
On Friday, Scientex said its unit Amber Land Bhd had entered into a sale and purchase agreement to buy 335.57 acres of freehold agriculture land in the Mukim of Pulai, Johor Baru, for RM284.19mil.
The seller is DKTMG Land Sdn Bhd, it said in a filing with Bursa Malaysia.
The land is located adjacent to Taman Pulai Indah in the south and Bandar Baru Kangkar Pulai in the east in Skudai.
It comes under the local authority area of Majlis Bandaraya Iskandar Puteri and is about 33km from Johor Baru city centre.
Scientex proposed the land be developed into a mixed property development.
ECO WORLD INTERNATIONAL BHD
By CIMB Research
Target price: RM1.21
CIMB Research has retained its positive view on Eco World International (EWI) as it expects the company to turn profitable in FY18 on the back of handover of property units.
It added that the sharp decline in its share price since the company’s initial public offering (IPO) remained unjustified.
“We reduce our forecast FY18 core net profit by 34% due to the slower sales trend and changes in the handover schedule for the company’s London City Island (LCI) project, but bump up forecast FY19 earnings by 16% as we expect more units to be handed over from the LCI project in FY19,” it said.
CIMB Research expects EWI to report a major earnings turnaround in FY18 (from losses in FY17) as it recognises revenue upon the handover of some units for the LCI and Embassy Gardens projects.
The group’s FY17 core net loss (excluding forex gains and losses) accounted for 79% of the research house’s forecast loss. This is mainly due to savings on finance cost following the full settlement of borrowings upon receipt of IPO proceeds in April 2017, and lower joint-venture losses for its ventures in London.
EWI recorded RM2bil worth of new property sales in FY17, at only 80% of its RM2.5bil full-year sales target.
Projects in London contributed RM1.69bil while those in Australia generated RM315mil.
The research house noted that lower-than-expected sales in Australia were due to slower demand as home buyers tend to buy closer to project completion.
For FY18, EWI targets to achieve RM2bil sales.
CIMB Research also pointed out that EWI had teamed up with Willmott Dixon to jointly develop 12 sites in Greater London and South East England.
EWI will acquire a 70% stake in the project sites as well as a 70% stake in Willmott Dixon’s development management arm, Be Living Holdings.
Through the acquisition, EWI will have access to a sizeable land bank of about 8,200 residential units.
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