Gamuda’s 1QFY13 net profit of RM145.4m was within our and consensus forecasts, coming in at 24.4% of both estimates. At its analysts’ briefing yesterday, management said its KV MRT project is largely on track but conceded that the property market outlook, especially in Vietnam, remains sluggish, as we had rightly pointed out. That said, we are maintaining our BUY call as we see growth in its construction division to more than offset the potential blip in the group’s property sales. Rolling forward our valuation to CY13 based on an unchanged PER of 16x, our FV now stands at RM4.90.
Within expectations. Gamuda’s 1QFY13 revenue of RM771.3m was 20.1% higher y-o-y, driven by its construction and property divisions, which chalked up commendable growth of 25.1% and 15.3% respectively over the period. Pre-tax profit, meanwhile, expanded by a smaller 9.0% y-o-y to RM182.2m owing to thinner property margins as well as higher financing costs and lower contribution from its associates. Overall, the 1QFY13 net profit of RM145.4m (+3.5% y-o-y), which was within both our and consensus expectations, marked the group’s best first quarter since its listing. On a quarterly basis, the 1QFY13 core earnings inched up 3.5% q-o-q despite a 20.5% decline in topline due to higher contribution from its concessionaire business.
Within expectations. Gamuda’s 1QFY13 revenue of RM771.3m was 20.1% higher y-o-y, driven by its construction and property divisions, which chalked up commendable growth of 25.1% and 15.3% respectively over the period. Pre-tax profit, meanwhile, expanded by a smaller 9.0% y-o-y to RM182.2m owing to thinner property margins as well as higher financing costs and lower contribution from its associates. Overall, the 1QFY13 net profit of RM145.4m (+3.5% y-o-y), which was within both our and consensus expectations, marked the group’s best first quarter since its listing. On a quarterly basis, the 1QFY13 core earnings inched up 3.5% q-o-q despite a 20.5% decline in topline due to higher contribution from its concessionaire business.
Underground works in place. At the briefing, management assured that progress of works on the underground portion of the Sungai Buloh-Kajang (SBK) MRT line is largely on track. Preparatory works have started at all seven underground stations. Gamuda has procured 10 tunnel boring machines, of which the first two units to be delivered by end-March 2013. As of end-1QFY13, it had recognised 7% of the underground works totaling RM3.8bn that it has undertaken.
Full steam ahead in carrying out PDP role. On the MRT’s elevated portion for which MMC-Gamuda is the appointed Project Delivery Partner (PDP), we gather that the group has started billing for work done and has recognised 5% of its PDP fee, which worked out to RM35m-RM40m as of 1QFY13. Judging from the pictures on-site shown at the briefing, works seem to have started at all the viaduct packages and are progressing largely on schedule.
SBK line awards at tail-end. Management said the cost of the entire SBK line works out to RM22bn-RM22.5bn vis-à-vis our previous estimate of RM20bn. To date, 54 end-1QCY13. This is likely to translate into a higher PDP fee for Gamuda, which our estimates put at another RM100m-RM120m. However, we have yet to incorporate this into our model pending the official awards of those contracts.
Likely to submit variation order on double track project. The RM12.5bn Ipoh-Padang Besar double-track project undertaken by Gamuda is currently 90% complete and looks set to be finished by 2HCY14. However, the exact quantum of the variation order the group intends to submit is still not known at this juncture. We believe the amount may be around RM500m-RM750m, much lower than the RM1.5bn speculated in some media reports earlier.
Property segment slows down. The group registered RM330m worth of property sales in 1QFY13, falling short of its previous full-year guidance of RM1.7bn but in line with our FY13 forecast for RM1.35bn. We believe the weaker numbers could be mainly attributed to the feeble Vietnamese property market, in which management conceded that improvements have yet to materialize. Its unbilled sales now total RM1.2bn. On the domestic front, the group’s FY13 sales are likely to be driven by continued interest in Bandar Botanic in Klang and Horizon Hills in Iskandar Malaysia. The year’s new launches include Madge Mansions near Jalan Ampang and The Robertson along Jalan Pudu.
Limited progress on potential disposal of concession assets. Meanwhile, management said that there has been limited progress in talks on the potential disposal of its water and toll concessionaries in Malaysia. We do not envisage much progress on this, at least until the impending national election is held.
Potential jobs ahead. Gamuda’s outstanding construction orderbook stands at RM4.5bn. With the SBK line largely on schedule and its double tracking contract approaching the tail-end, attention will shift to securing more jobs in the near term. Management believes that at least one of the remaining two of the KV MRT’s lines may be awarded by end-CY13. We understand that the feasibility studies conducted by independent consultants have been completed while discussions are now on between MRT Corp, SPAD and the relevant authorities. With the national election now likely to be held in 1HCY13, we expect more news relating to the RM8bn Gemas-Johor Bahru double tracking project, for which Gamuda will be partnering China Railway Construction in a joint bid in 2H next year.
BUY. With the 1QFY13 results largely in line, we make no major changes to our core assumptions. Nonetheless, our net profit forecasts are revised marginally higher by 1.4% for both FY13 and FY14 for housekeeping purposes following the release of Gamuda’s FY12 annual report. Rolling forward our valuation from FY13 to CY13, and pegged to an unchanged PER of 16x on its construction and property earnings, our FV now stands at RM4.90. Maintain BUY.
Source: OSK
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