Gamuda - Waiting for post-election boost HOLD

- Maintain HOLD on Gamuda with our fair value lifted slightly to RM3.81/share (previously: RM3.79/share). 

- Gamuda is on track to achieve record FY12F net profit of RM517mil (+24% YoY) – although we believe this has been largely priced-in by the market.

- On the other hand, we project its 4QFY12 net profit to decline 20% QoQ on a (i) normalisation of construction margins from its Ipoh-Padang Besar Double Tracking project (focus has shifted to lower-value systems/M&E works); and (ii) absence of recognition from gain on land sales to AEON (Celadon City) - the balance was booked in 3QFY12.  

- Elevated works on the Sg.Buloh-Kajang MRT has shifted to the active mode since last August. This sets the tone for tunnelling works to commence from 1Q13 once the tunnel boring machines (TBM) are delivered progressively throughout 2013. First off the blocks would be the stretch from Pudu to Pasar Rakyat.

- To-date, we estimate that MRT Corp has awarded 45 out of a total 85 work packages worth ~RM19.7bil. Five packages worth a combined RM3.5bil were awarded on 14 September. This includes the final viaduct package  v8 (RM985mil) that was won by UEM.

- However, we expect Gamuda’s new contract flows to remain muted over the near-term. A firm decision on the MRT Lines 2 & 3 will likely only pan out from 2H13.

- Likewise, we do not envisage any of Gamuda’s other potential major bids – e.g. Gemas-JB double tracking (RM8bil) and Langat 2 (RM3.6bil) – to be awarded before the 13^th  General Elections.     

- Given the rising levels of regulatory/tariff uncertainties associated with its existing concessions in Malaysia, we sense that Gamuda could be open to disposing its water (SPLASH) and toll (Litrak - LDP, SPRINT) businesses – granted the right offer is received. But, the timing of these deals are uncertain.

- On our estimates, Gamuda’s concession businesses accounts for RM1.17/share or 29% of its Sum-Of-Parts value.

- We have toned down our FY12F property pre-sales forecast by 12% to ~RM1.5bil. This is to account for softer sales volumes at most of its developments in 2HFY12, save for Horizon Hills.

Source: AmeSecurities