Gamuda - 4QFY12 Results Likely In Line

Gamuda  is  poised  to  release  its 4QFY12  results  later on  27th  Sept.  We  expect  no major surprises with FY12 net profit likely to be line with our full-year estimate of RM529.8m.  Although  we  continue  to  caution  investors  on  potential  weakness  in its property sales, we see strength in its core construction earnings as works on the  KV  MRT  go  into  full  swing,  while  more  mega-billion  projects  could  be  up  for grabs post-national election. Maintain BUY with our FV maintained at RM4.46. 

FY12  numbers  likely  in  line.  We  expect  no  major  surprises  for Gamuda’s upcoming 4QFY12  results  scheduled  for  release  on  27th  Sept.  Inclusive  of  the  RM50m  gain  from land  disposal  booked  in  earlier,  FY12  net  profit  is  likely  on  par  with  our  estimate  of RM529.8m,  driven  by  its  construction  division  with  the  KV  MRT  SBK  line  gradually gathering  momentum  coupled  with  its  property  division  which  registered  RM799.1m  in revenue for 9MFY12.  

Update  on  SBK  line.  MRT  Corp  has  so  far  awarded  40  out  of  a  total  of  85  contract packages  worth  RM16.5bn  on  the  SBK  line.  We  understand  that  the  remaining  jobs totaling  RM3.5bn-RM4.0bn  will  be  dished  out  progressively.  These  include  the  RM1.6bn rolling-stock provision for 58 sets of four-car train, which we understand to have received three  bids  from  Changchun  Railways  Vehicle,  Siemens  SMH  Rail  Consortium  and  CSR Zhuzhou Electric Locomotive respectively in the form of JV with local partners. Also in the pipeline  are  the  v8  viaduct  package  likely  to  be  clinched  by  MRCB,  and  three  elevated station packages. With a majority of the packages awarded out by year-end, we view the progress as largely on schedule as MRT Corp has earlier guided.

Underground  works  on  schedule.  On  the  other  hand,  we  understand  that  Gamuda’s team has started works on all seven underground stations on the SBK line, including the Bukit Bintang station which has previously drawn much public attention.  Potential jobs after election. Moving into 2013, we expect to see a lineup of mega-billion projects to potentially push up Gamuda’s contract flows after the general election, which is now rumoured to be held as soon as November this year. Key projects that management is actively looking at include the RM8bn Gemas-Johor Bahru Electrified Double Tracking, in which Gamuda is bidding with China Railway Construction, and the RM3.7bn Langat 2 water  treatment  plant  with  tenders  called  by  PAAB  closing  on  20  Nov.  Should  Gamuda
secure  both  these  projects  at  a  presumed  50%  share,  its  orderbook  could  swell  from RM5.4bn as of April 2012 to over RM10bn.

Possible slowdown in property segment. Recall that Gamuda’s 9MFY12 property sales totalled RM1.2bn vis-à-vis its full-year target of RM2.0bn, with unbilled sales amounting RM1.3bn. We make no changes to our FY12 sales target of RM1.5bn as we reiterate our belief that the property market has most likely experienced some  slowdown  over  the  last  three  to  six  months,  amid  iProperty’s  recent  comments  that  property transactions  in  the  high-end market  (>RM500k/unit)  have  dipped  marginally.  Our  FY13  and  FY14  forecasts stand at RM1.8bn and RM2.0bn respectively.

BUY.  All in, we expect no major surprises in Gamuda’s upcoming 4QFY12 results release and hence reiterate our BUY call with our SOP-based FV unchanged at RM4.46. Key catalysts going forward include the sooner-than-expected polling date which could pave the way for the potential implementation of  the RM6bn Gemas-Johor  Bahru  double  tracking  project,  the  rollout  of  the  RM3.7bn  Langat  2  water  treatment  plant,  as well as potential sale of its highway concessions.

Source: OSK