Gamuda - Marching on

We  see  the  progress  in  the  construction  of  the  first  KV  MRT  line  as  a  boon  for Gamuda,  which  is  set  to  see  its  earnings  soar  to  a  record  high  over  the  next  two years. The group is likely add potential jobs such as the remaining two MRT lines, the Gemas-Johor Bahru double track, as well as the Langat 2 water treatment plant to its existing RM4.5bn-strong orderbook, which would in turn  spur interest in the stock. Maintain BUY, with our SOP-based FV at RM4.90. 

MRT  largely  on  track.  Works  on  the  underground  portion  of  the  Sungai  Buloh-Kajang (SBK)  MRT  line  is  largely  on  track  while  preparatory  works  have  started  at  all  seven underground stations. Gamuda has procured 10 tunnel boring machines, of which the first two  units  will  be  delivered  by  end-March  2013.  On  the  MRT’s  elevated  portions, management has guided that works at all the viaduct packages are largely progressing on schedule. To date, 54 packages worth more than RM20bn have been awarded,  while the remaining 32 packages totalling RM2bn-RM2.5bn will be handed out by end-1QCY13.  

Property  unit  buoyed  by  local  sales.  Gamuda  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,  with  unbilled  sales  at  RM1.2bn. While  the  Vietnamese property market has yet to show any affirmative signs of rebounding, the company’s local property sales have remained resilient, 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.   

Potential jobs ahead. Gamuda’s outstanding construction orderbook stands at RM4.5bn. With  works  on  the  SBK  line  largely  on  schedule  and  its  double-tracking  contract approaching  the  tail-end,  attention  will  shift  to  securing  new  jobs  in  the  near  term. Management  believes  that  at  least  one  of  the  two  remaining  KV  MRT  lines  may  be awarded  by  end-CY13.  The  feasibility  studies  conducted  by  independent  consultants have been completed while discussions are now underway between MRT Corp, the Land Public  Transport  Commission  (SPAD)  and  the  relevant  authorities.  With  the  general 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,  as  well  as  the  potential award  of  the  Langat 2  water treatment plant in 2H next year.

BUY.  We  continue  to  like  Gamuda’s strong  execution,  and  with  works  on  the  SBK  line largely  intact,  the  company  looks  set  to  post  its  most  profitable  year  yet.  Moreover,  we see  it  as  the  biggest  beneficiary  when  the  remaining  two  MRT  lines  are  to  be implemented come 2H13. Maintain BUY, with a SOP-based FV of RM4.90.

Source: OSK