Gamuda’s 1HFY12 earnings of RM268.8m (+47.2% y-o-y) were in
line with both our and consensus forecasts, making up 51.5% and 54.5% of the
respective full-year estimates. Overall, we are encouraged by the progress in
its execution of the KV MRT project after jointly clinching the tunnelling
portion of the SBK line with MMC. We are now looking forward to more news on
the Gemas-Johor Bahru EDT in 3Q12 worth an estimated RM8bn. Maintain BUY, with
our SOP-based FV unchanged at RM4.57.
On a roll. Gamuda’s 1HFY12 revenue came in at a sturdy RM1.41bn (+13.7% y-o-y) driven by its
property division, which saw revenue soar
68.6% during the period to RM520.9m. The group’s core earnings surged by
a stronger 47.2% to RM268.8m owing to margin expansion in its construction and
property divisions, both of which witnessed a 620bps improvement in PBT
margins. We attribute these improvements
to the recognition of better margins for its Electrified Double Tracking (EDT)
project as it had been rather conservative
for FY09-FY10, as well as sales of
higher-end property developments
last year. On a quarterly basis, the 2QFY12 numbers improved markedly across
the board on a y-o-y and q-o-q comparison.
What’s new on the
MRT. Management said
that 27 works packages for the
Klang Valley My Rapid Transit (KV MRT) Sungai Buloh-Kajang (SBK) line
have been awardedout, while tenders and awards for the remaining 63 packages
are expected to be mostly completed by 4Q12. We understand that works on the
tunnelling portion could start as soon as 3Q12, and the Government is currently
negotiating with landowners on vacating the affected sites. The target date for
completion is July 2017. Ten tunnel boring machines, each worth some RM150m,
will be deployed at 4 launch shafts in core areas such as Semantan, Maluri and
Cochrane.
Recognizing works on
elevated portion. More interestingly, management highlighted that all
packages for the elevated portion of the SBK line will be recognized in its
books in view of its joint appointment with MMC as the Project Delivery Partner
(PDP) for this portion. To put it simply, Gamuda’s revenue going forward would
include all works relating to the elevated portion, plus the 6% management fee
it is entitled to, while its operating expenses would comprise
payments made to the
respective contractors for the works involved. While this would no doubt
distort its margins going forward, we are not overly concerned as long as there is
proper execution to ensure the timely completion of the SBK line, which
will in turn ensure that Gamuda pockets its 50% share of the RM720m management
fee due. We are making no changes to our revenue and opex forecasts for now,
pending more clarity on the accounting policies involved, as well as further
assurance on the progress of implementation.
Source: OSK188
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