KUALA LUMPUR: A possible revival of mega projects like the High-Speed Rail (HSR) and Mass Rapid Transit Line 3 (MRT3) is likely to be a boost for Gamuda Bhd, AllianceDBS Research says as it upped its sum of parts (SOP) derived target price to RM4.60 from RM4.30.
It said in a report yesterday that the government’s upcoming medium term recovery plan in October may serve as a prelude to the potential approval of funding for projects in Budget 2021, which will be tabled in November, and the 12th Malaysia Plan.
The HSR and MRT3 will be significant projects to drive the economy from 2021 and the research house expects Gamuda to have a role in both.
“Gamuda has been making headway in Australia where it has been shortlisted for two sizeable projects. It has a 67% probability of winning one metro project and 33% probability of winning a motorway project.
“The most important catalyst for Gamuda and the sector is the signal from the government to pump-prime the economy. In our view, Gamuda’s strong reputation will put it in the driver’s seat to clinch key government projects such as HSR, MRT3 and Bandar Malaysia, ” it said.
AllianceDBS Research said its SOP-derived target price is raised to RM4.60, which now assumes 33 sen a share from new jobs, no project delivery partner fees and contribution from Penang Transport Master Plan and discounts for its toll highways and property businesses.
“Our positive outlook is a contrarian call and our earnings forecast for financial year 2022 (FY22) is above the consensus. Our target price (TP) is still at the higher end. Even at a new TP of RM4.60, the stock trades at 14.9 times FY22 earnings per share which is below its five-year mean, ” it said.
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