AmInvestment downgrades Gamuda, cuts fair value to RM2.20

KUALA LUMPUR (Nov 16): AmInvestment Bank Research has downgraded Gamuda Bhd to “Underweight” at RM2.43 with a lower fair value of RM2.20 (from RM2.80) and said it cut its FY19-21F net profit forecasts by 4%, 9% and 13% respectively.

In a note today, the research house said its new fair value is based on 10x revised CY19F FD EPS of 22 sen.

It said the reduction in the forward P/E multiple from 12x previously is to reflect the continuing de-rating of construction stocks.
Meanwhile, it said the earnings downgrade is largely to factor in weaker property profits as we expect Gamuda to command weaker selling prices and hence margins for its local property launches over the short term.

“We share Gamuda’s optimism about its new township projects in the Klang Valley, i.e. Gamuda Gardens (near Rawang), Gamuda Cove (near Nilai) and Twentyfive.7 (near Kota Kemuning), which are strategically located, well planned and effectively marketed.

“Gamuda projects combined sales from the three township projects to almost quadruple to RM1.15 billion in FY19F from a mere RM300 million in FY18.

“However, we believe Gamuda will have to “go with the flow” by offering discounts to buyers in line with the commitment made by the Real Estate & Housing Developer’ Association Malaysia (REHDA) to the government in the recently announced Budget 2019 to cut prices for new launches and unsold stocks by 10%.

“We believe the reason is Gamuda will price itself out of the market if it holds the prices while its competitors reduce them,” it said. —

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