Gamuda's FY16 results beat our forecast by 8% but met consensus estimates. The variance against

STOCK FOCUS OF THE DAY

Gamuda : A Soft Patch In FY16   BUY

Gamuda's FY16 results beat our forecast by 8% but met consensus estimates. The variance against our projection came largely from unexpectedly strong overseas property sales during the final quarter. Overall, its FY16 net profit eased 8% as MRT1 was at the tail-end while MRT2 had yet to start contributing. We raise our FY17F/18F earnings forecasts by 12% and 6% largely to factor in Gamuda’s guidance for potential construction job wins of RM3-4bil over the next 12 months. Our forecasts now assume Gamuda to secure RM2bil new jobs annually in FY17F and FY18F, from none previously. We maintain our BUY call but reduce our FV by 5% to RM5.60 after we factor in the dilution from Warrants 2016/2020 and update its balance sheet.

Gamuda is hopeful to secure contracts worth RM3-4bil from Gemas – Johor Bahru double tracking, Pan Borneo Highway (Sabah) and LRT3 over the next 12 months. It is equally bullish on the outlook for the local construction sector over the next three years, backed by KL-Singapore high-speed rail, MRT3 and Penang Transport Master Plan (PTMP) which have a combined project value in excess of RM100bil. Gamuda recorded MYR2.05bil property sales in FY16, up by 69% vis-à-vis MYR1.21bil in FY15. It guided for MYR2.12bil property sales in FY17. As at end-4QFY16, its unbilled sales stood at MYR1.2bil, up from RM1bil three months ago. For PTMP, Gamuda already submitted its plan for the George Town - Bayan Lepas LRT line to Land Transport Commission (SPAD). It hopes to complete the environmental and social impact assessment studies for submission to the Department of Environment by year end. It expects approvals from 2H2017.  Gamuda is the best proxy to the booming construction sector in Malaysia given its dominant role in MRT and its involvement in Pan Borneo Highway. Its earnings visibility is strong backed by construction and MRT project delivery partner (PDP) backlogs of RM9.0bil (Exhibit 3) and RM7.5bil respectively. It has booked itself a ticket to ride on the next infrastructure/property boom in Penang via its PDP role in PTMP.

Others :

DRB-Hicom : The Bezza challenger is here             BUY

Inari Amertron : Riding on robust data and smartphone growth                 HOLD

ECONOMIC HIGHLIGHTS

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