STOCK FOCUS OF THE DAY
Gamuda : Returning 500 acres of land in Hanoi BUY
We maintain our BUY call and forecasts, but raise our SOP-based FV by 5% to RM5.87 (from RM5.60) (Exhibits 1 & 2), as we roll forward our valuation base year to CY18 (from CY17), which more than offset a slight reduction in our property RNAV estimates. We value Gamuda's construction business at 16x CY18 net profit, in line with our benchmark 1-year forward P/E of 14-16x for large-cap construction stocks. TheEdgeProperty.com reported that Gamuda is returning Parcel B of Gamuda City (also known as Yenso Park) in Hanoi to the Vietnamese government. Quoting Gamuda Land Vietnam general director Chow Chee Fan, it said that the 500-acre commercial precinct of the 1,200-acre integrated property project has become “not worth developing” as Gamuda has to incur US$100mil (RM432mil) to relocate the existing occupiers.
The returning of the land will not affect Gamuda City’s ability to continue contributing about 5% to group profits. Chow guided for higher sales of US$150mil (RM648mil) in FY18F versus US$120mil (RM518mil) estimated for FY17F. Excluding the returned land, we estimate Gamuda City’s outstanding GDV still stands at about RM5bil at present. While the latest development appears to be negative to Gamuda, it is far from putting a significant dent to Gamuda’s fundamentals. Gamuda remains the best proxy to the booming construction sector in Malaysia given its dominant role in MRT (as the project delivery partner (PDP) and tunneling contractor) and its involvement in Pan Borneo Sarawak Highway. Its earnings visibility is strongly backed by an outstanding construction order book of RM8.3bil.
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Plantation Sector : Short-term positive; outlook remains neutral (1) NEUTRAL
Plantation Sector : News flow for week 15-19 May (2) NEUTRAL
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