STOCK FOCUS OF THE DAY
Gamuda: What if Gamuda wins MRT3 turnkey contract? BUY
We maintain our BUY call, forecasts and SOP-based FV of RM5.95 (Exhibit 1) which values 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.
Various sources are pointing to an impending announcement of the winning bid for the MRT3 turnkey contract from the government. To recap, the RM45bil contract for the circle line spanning over 40km in the heart of Kuala Lumpur is currently a two-horse race between a 45:45:10 Gamuda-MMC-George Kent JV and China Communications Construction Company (CCCC).
No doubt, it will be highly positive to Gamuda if the Gamuda-MMC-George Kent JV is to bag the MRT3 turnkey contract. However, the impact on Gamuda's earnings will not be immediate. Gamuda guided for 18-22 months of preparation works (after the contract award), before substantial physical work could commence on the ground, based on its experience with the MRT2 project. This means meaningful contributions from the project would only kick in from FY21 (July), which is beyond our 3-year forecast period of FY18-20F (July).
Others :
Inari Amertron: Overreaction to trade war BUY
QUICK TAKES
Plantation Sector: China imposes 25% tariff on US soybeans NEUTRAL
STRATEGY
Global Markets: Losers and winners of Sino–US trade war
NEWS HIGHLIGHTS
Property Sector: No glut as Malaysia needs 3.2 million more homes — Rehda
Hiap Teck: To pare down stake in Eastern Steel
Boustead: Allocates RM1.3bil capex
Top Glove: Completes Aspion acquisition
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