PublicInvest maintains neutral on Gamuda, TP raised to RM2.88

  • Analyst Reports
  • Thursday, 28 Mar 2019

KUALA LUMPUR: PublicInvest research expects GAMUDA BHD's profitability to continue to worsen in the remaining quarters of the year given the full impact of the lower construction profits and lower profit margins from the property segment.

However, the research house increased its FY19-21 forecast slightly, 7% on average, to capture better recognition of top line numbers. 

Its target price was raised to RM2.88 from RM2.75 previously while its neutral rating remained uncanged.

In its recently announced 2QFY19 results, Gamuda recorded net profit of RM173.1mil, down 22.6% year-on-year (y-o-y) as there were no contributions from SPLASH following its disposal in early August last year.

For 1HFY19, net profit came in 19.3% lower y-o-y at RM344.9mil.

Earnings was also impacted by lower profit from construction, reflecting the new structure of the KVMRT 2 contract scale.

"Construction earnings in 2QFY19 have seen some impact from the new structure and value of the KVMRT 2 project. Although billings progressed at a stable rate, pre-tax profit margin has dropped to 8.1% versus 8.4% and 11.6% in 1QFY19 and 2QFY18 respectively."

PublicInvest added that it expects margins and earnings from this division to deteriorate further although total orderbook of about RM10.5bil provides earnings visibility for the next three years.

In the property segment, sales in 1HFY19 came in at RM1.3bil, which was 31.6% lower y-o-y and only 32.5% of the sales target for this year.

The research house said management has maintained its RM4bil target as it remains optimistic for 2H.

"It is expected to be underpinned by Gamuda Cove which is seeing strong initial response with all double-storey houses fully sold, and existing overseas townships such as Gamuda City and Celadon City in Vietnam which appear on track to meet or exceed target of RM1.5bn sales," it said.
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