Actual vs. Expectations
Below consensus estimate and that of ours.
1Q12 net profit of RM29.2m came in only at 7% of ours and the consensus’ forecasts of RM437.4m.
Dividends No dividend was declared during the quarter.
Key Result Highlights
QoQ, the net profit dropped by 89% due to a drop in construction earnings. To recap, Zelan recorded write-backs of LAD in 4Q11.
YoY, the revenue increased by 4% and net profit dropped by 30%. This was mainly due to the impact of a lower margin by 13% for Gas Malaysia due to the revision of gas tariffs in June2011.
Nonetheless, the 1Q12 construction earnings were much better (YoY) as compared to the RM25m pre-tax loss recorded in 1Q11.
Outlook We believe that MMC’s feasibility study on the privatisation of KTMB will partly cover the utilisation of KTMB’s landbanks for commercial developments.
We expect MMC-Gamuda to be the frontrunner for MRT circle line works, which are to be announced by mid-2013.
Change to Forecasts
Lowered our FY12 and FY13 estimates by 21% and 13%, respectively, as we imputed in the dilution of Gas Malaysia’s contribution and delayed the PDP recognition to 2H12 as MRT works are still at their preliminary stage.
Valuation We have lowered our Target price to RM3.11 from RM3.20 previously as we imputed in MMC’s shareholding dilution from 41.8% to 30.9% in Gas Malaysia.
Risks Delays in MRT works and late deliveries of TBMs (Tunnel Boring Machine).