KUALA LUMPUR: Gamuda Bhd
is seeing good expansion prospects following its purchase of equity interest in a rail constructor in Australia.
The construction player is taking up a 50% stake in Martinus Rail, Australia's largest independent specialist rail constructor, which will speed-track its expansion into the country's infrastructure construction market.
According to Affin Hwang Capital research, Gamuda will provide the balance sheet to support Martinus Rail with its bids for railway projects in Australia worth about A$20bil.
Meanwhile, Gamuda's property sales are expected to rebound after they dropped 14% year-on-year (y-o-y) to RM3.1bil in FY19 due to the weak market conditions.
"With the sustained strong overseas property sales and expansion in local sales (more launches at Gamuda Cove, Gamuda Gardens and twentyfive.7 townships), Gamuda is targeting sales of RM4bn in FY20," said Affin Hwang.
The research house maintained Gamuda Bhd as its top large-cap sector buy with a raised target price of RM4.30.
"We fine-tune our FY20-21E EPS (+1-2%) and introduce FY22E. Weak core earnings prospects (3-year CAGR of -5%) are due to potential loss of toll road concession earnings (assumed in our forecasts) following the proposed disposal to the government for RM2.36bn.
"But good prospects to expand its construction and property earnings with funds for reinvestments," it said.
Gamuda recently announced FY19 net profit of RM706mil, which was in line with Affin Hwang's estimate of RM704mil but above consensus forecast of RM615mil.
Net profit rose 33% y-o-y in FY19, mainly owing to lower net exceptional losses of RM14mil compared to RM298mil in FY19.
Pre-tax profit was 20% higher y-o-y to RM974mil on higher property and concession earnings, partially offset by lower construction earnings.
Core net profit fell 13% y-o-y to RM720mil on lower construction and concessions core earnings due to the lower MRT2 line contract value and a loss of SPLASH earnings after its disposal.
is seeing good expansion prospects following its purchase of equity interest in a rail constructor in Australia.The construction player is taking up a 50% stake in Martinus Rail, Australia's largest independent specialist rail constructor, which will speed-track its expansion into the country's infrastructure construction market.
According to Affin Hwang Capital research, Gamuda will provide the balance sheet to support Martinus Rail with its bids for railway projects in Australia worth about A$20bil.
Meanwhile, Gamuda's property sales are expected to rebound after they dropped 14% year-on-year (y-o-y) to RM3.1bil in FY19 due to the weak market conditions.
"With the sustained strong overseas property sales and expansion in local sales (more launches at Gamuda Cove, Gamuda Gardens and twentyfive.7 townships), Gamuda is targeting sales of RM4bn in FY20," said Affin Hwang.
The research house maintained Gamuda Bhd as its top large-cap sector buy with a raised target price of RM4.30.
"We fine-tune our FY20-21E EPS (+1-2%) and introduce FY22E. Weak core earnings prospects (3-year CAGR of -5%) are due to potential loss of toll road concession earnings (assumed in our forecasts) following the proposed disposal to the government for RM2.36bn.
"But good prospects to expand its construction and property earnings with funds for reinvestments," it said.
Gamuda recently announced FY19 net profit of RM706mil, which was in line with Affin Hwang's estimate of RM704mil but above consensus forecast of RM615mil.
Net profit rose 33% y-o-y in FY19, mainly owing to lower net exceptional losses of RM14mil compared to RM298mil in FY19.
Pre-tax profit was 20% higher y-o-y to RM974mil on higher property and concession earnings, partially offset by lower construction earnings.
Core net profit fell 13% y-o-y to RM720mil on lower construction and concessions core earnings due to the lower MRT2 line contract value and a loss of SPLASH earnings after its disposal.
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