AmWatch - Gamuda : Hungry for more jobs BUY, 27 Mar 2015

STOCK FOCUS OF THE DAY

Gamuda : Hungry for more jobs                BUY

We maintain BUY on Gamuda with an unchanged fair value of RM5.80/share. Gamuda’s 1HFY15 results make up 50% of our full-year net profit forecast (consensus: 48%). While 2H numbers could come in below that of 1H, we retain our FY15F net profit of RM738mil. 1H earnings rose 10% YoY (RM368mil), mainly on better work progress for underground works of MRT Line 1 and positive impact from a higher stake in KESAS.

Overall progress for the elevated and tunneling portions of MRT 1 have reached 61% and 50%, respectively. For the upcoming MRT2, the MMC-Gamuda JV’s PDP agreement should be concluded by 2Q15. The JV should also be in the running for the tunneling job, where major works packages should be out from mid-2016 onwards.

New property sales rose 20% QoQ to RM292mil but was down by a steep 45% YoY for 1HFY15 (RM535mil), with notably weakness seen for the Horizon Hills project in Johor. Unbilled property sales stood at RM1.5bil. Management expects weaknesses in the local property market to persist in 2015/2016, particularly for the Johor region. As such, the group has revised downwards its FY15F new property sales target by ~34% to RM1.2bil.

Gamuda has been pro-actively re-profiling its landbank during the current downcycle via a series of shrewd acquisitions in Kuang, Kundang, Kota Kemuning, and a 1,530-acre tract fronting ELITE, that can be developed into future townships.   It had also recently acquired a parcel of freehold land (1,435 sq m) on Chapel Street, Melbourne for AUD40mil. The said land is to be developed into 150 apartment units with an estimated GDV of RM390mil (targeted launch: late-2015). Apart from the MRT 2 project, we envisage several share price catalysts coming up for Gamuda:- (i) the PDP for the Penang Transport Master Plan; (ii) renewed hopes of a resolution for SPLASH; and (iii) potential inclusion into the FBM KLCI 30 Index.

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