PETALING JAYA: Maybank Investment Bank Research (Maybank IB) expects the fourth quarter ending July 31,2020 for infrastructure-property based Gamuda Bhd to be better, as the work pace at its projects has picked up after the government allowed construction activities to resume from May 4 onwards.
The research house said yesterday that while the Klang Valley MRT2 was now at 70%-75% of its optimum/pre-movement control order (MCO) level; its work pace is however expected to peak at only 90%-95% of its pre-MCO level under the new social distancing normal.
It issued the report after Gamuda announced its third-quarter results ended April 30 (3Q20). Hit by the MCO, Gamuda posted a 3Q20 net profit of just RM40mil (-77% year-on-year (y-o-y/q-o-q), bringing the nine-month financial year 2020 to RM389mil (-25% y-o-y), meeting only 59%/63% of Maybank IB/consensus financial year estimates.
“This is its weakest quarter in over a decade (since 4Q09). 4Q20 should be better, but activities should still be below their optimum/pre-MCO levels. We have cut earnings forecasts and downgraded the stock to a hold due to a reduced upside to our new RM3.80 revalued net asset value target price (-30 sen) and in lack of a near-term re-rating catalyst, ” it said.
Gamuda’s 3Q20 reflected half a quarter of almost no construction activities (with the exception of KVMRT2 underground works) and property progress billings, and one month of 80%-90% traffic fall at toll roads, due to the MCO.
Group revenue halved y-o-y/q-o-q while net profit fell 77% y-o-y/q-o-q, as it continued to incur fixed overheads and new sum-of-parts compliant costs.
Coupled with an uncertain business prospect, no interim dividend was declared; the FY20 dividend per share will be just six sen (FY19: 12 sen).
“We have cut the FY20/21/22 earnings by 26%/6%/1%. Supporting mid-term earnings is its sizeable outstanding construction order book of RM7.5bil and unbilled property sales of RM3bil.
“Near-term re-rating catalysts are, however, lacking. While Gamuda is a beneficiary of major infra project rollouts due to its strong track records, we believe the government’s near-term focus will be on the smaller project rollouts which have a shorter lead-time; thus, their multiplier impact is more immediate, ” Maybank IB said.
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