Gamuda active, up 0.62% in relief rally

KUALA LUMPUR (Nov 8): Gamuda Bhd shares rose 0.62% in active trade at mid-morning today, as the stock was lifted by a relief rally.

At 10.47am, Gamuda rose 3 sen to RM4.84, with 3.79 million shares traded.

Hong Leong IB Research said Gamuda Bhd’s share price plunged as much as 34 sen to a low of RM4.73 yesterday, before narrowing the losses to 26 sen or 5.1% at RM4.81.

In a trading idea note today, the research house said the rout was attributed to reports MRT Corp is opening a tender to select a turnkey contractor to build and finance the upcoming MRT3 (estimated RM35 billion- RM40 billion), triggering speculation that the MRT3 will no longer employ the project delivery partner (PDP) model.

“Despite the uncertainty, HLIB institutional research maintains a Buy rating on Gamuda, with unchanged target price of RM6.36, as management reassured that it will still bid for the underground works from the winning consortium, given its tunnelling track record with SMART, MRT1 and MRT2, which will render it in a prime position to secure such works for MRT3. Management also maintains its RM10 billion orderbook replenishment guidance over the next 2 years, which includes jobs such as the MRT3 and ECRL.

“At RM4.81, Gamuda is trading at 14.7x FY18 P/E (18% below its average 10-year average P/E of 18x and 16% lower than its peers 17.6x). In terms of P/B, the stock is trading at 1.58x (17% below its average 10-year 1.9x and 37% lower than its peers 2.51x). We believe such valuations and yesterday’s unwarranted selldown could have priced in most of the negatives, providing sufficient margin of safety to cushion further slide in share prices.

“Gamuda is poised for a relief rally, after recent selling climax. A decisive breakout above the immediate resistance of RM4.91 will likely lift share prices higher towards RM5.04-5.33 levels. Key supports are RM4.65-4.73. Cut loss at RM4.60,” the research house said. — theedgemarkets.com

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