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Q10 result was within expectation. The cumulative net profit of RM204.1m (36%yoy) accounted for 75% of our full year forecast of RM269.5m.
• The satisfactory 3Q10 results were due to better performance from all key businesses, namely construction and property.
• Gamuda has declared a second interim dividend of 6.0 sen in 3Q10 (3Q09: 4.0 sen), cumulating total dividend of 12 sen. NTA/share
improved to RM1.62 (3QFY09: RM1.57).
• We reiterate our BUY call with a target price of RM3.30 (under review) based on sum-of-parts valuation.
Segmental breakdown. For 3Q10, all divisions registered better performance. Pretax profits of its construction & engineering division jumped by 138%yoy to RM50.8mn vs Property (22.3%yoy to RM71.9mn) versus Water & Expressway (16.5%yoy to RM142.3mn. Water & Expressway remained Gamuda’s main profit contributor, accounted for 54% of total pretax profit, followed by Property (27%) and Construction (19%).
Outlook.
Construction Division: 95% of the land for Electrified Double Track Project has been handed over (representing a delay of 2 years). The work progress is expected to accelerate in the next quarter. New Doha International Airport Project (NDIA) in Qatar is progressing on schedule with 84% of the works completed. Collections from the Qatari Government continue to be on time. Work progress for Yenso Park and Sewage Treatment Plant in Vietnam is on track. Property Division: The Group’s property division continues to benefit from the improved market sentiments. Due to the strategic locations of its landbank, the products that were launched such as semi detached houses and bungalow, particularly in Bandar Botanic, attracted significant demand. Water-related concession division: No new update as Splash is still waiting for new offer to be proposed by the Government.
Maintain BUY. The counter has slightly outperformed the KLCI over the past 1-3 months by 6%-9%. While valuation may appear stretched at 19.7x FY11, it is still relatively undemanding based on its historical trading range of 12x-30x. In addition, the expected stronger earnings momentum over the next quarters should enhance its multiples, hence, provide further upside potential. We are currently reviewing our conservative fair value of RM3.30 (based on sum-of-parts) with potential upward revision. The RM36bn MRT project will be the key catalyst for the stock in the near term.
MRT decisions by year-end? Management indicated that both parties, Gamuda-MMC JV is currently in advanced discussions with the government for the proposed RM36bn MRT project. It was presented to the government in January this year. The construction works of the MRT is targeted to kick-start by Jan 2011, if everything goes as planned and all necessary approvals are obtained from the relevant parties. Besides being a project manager, Gamuda-MMC indicated that they are targeting to undertake the underground portion of the works, estimated at 30% of the total project or RM11bn. Meanwhile, the remaining 70% or RM25b for above ground will be tendered out to other contractors with Gamuda-MMC JV being the project manager. Gamuda-MMC JV is banking on its track records for the RM11b electrified double tracking project as well as the construction of the Kaohsiung MRT project in Taiwan to secure the proposed project.
Three MRT lines, divided into 2 phases. The MRT project will be divided into two phases valued at RM23bn and RM13bn, respectively. As indicated earlier, there will be three lines for the proposed MRT: Damansara to Serdang, Kepong to Cheras and a circle line surrounding the city centre. The circle line will connect the two new MRT lines, the existing LRT lines as well as the monorail line.
Updates on SPLASH. According to The Edge Daily reported earlier this week, the water saga may have been broken with all parties agreeing on pricing and the operations and maintenance concessions. We expect the Selangor water consolidation to reach its final decisions by year-end as it has long been overdue. We are confident that any development of this water issue would be positive for Gamuda.
Q10 result was within expectation. The cumulative net profit of RM204.1m (36%yoy) accounted for 75% of our full year forecast of RM269.5m. • The satisfactory 3Q10 results were due to better performance from all key businesses, namely construction and property.
• Gamuda has declared a second interim dividend of 6.0 sen in 3Q10 (3Q09: 4.0 sen), cumulating total dividend of 12 sen. NTA/share
improved to RM1.62 (3QFY09: RM1.57).
• We reiterate our BUY call with a target price of RM3.30 (under review) based on sum-of-parts valuation.
Segmental breakdown. For 3Q10, all divisions registered better performance. Pretax profits of its construction & engineering division jumped by 138%yoy to RM50.8mn vs Property (22.3%yoy to RM71.9mn) versus Water & Expressway (16.5%yoy to RM142.3mn. Water & Expressway remained Gamuda’s main profit contributor, accounted for 54% of total pretax profit, followed by Property (27%) and Construction (19%).
Outlook.
Construction Division: 95% of the land for Electrified Double Track Project has been handed over (representing a delay of 2 years). The work progress is expected to accelerate in the next quarter. New Doha International Airport Project (NDIA) in Qatar is progressing on schedule with 84% of the works completed. Collections from the Qatari Government continue to be on time. Work progress for Yenso Park and Sewage Treatment Plant in Vietnam is on track. Property Division: The Group’s property division continues to benefit from the improved market sentiments. Due to the strategic locations of its landbank, the products that were launched such as semi detached houses and bungalow, particularly in Bandar Botanic, attracted significant demand. Water-related concession division: No new update as Splash is still waiting for new offer to be proposed by the Government.
Maintain BUY. The counter has slightly outperformed the KLCI over the past 1-3 months by 6%-9%. While valuation may appear stretched at 19.7x FY11, it is still relatively undemanding based on its historical trading range of 12x-30x. In addition, the expected stronger earnings momentum over the next quarters should enhance its multiples, hence, provide further upside potential. We are currently reviewing our conservative fair value of RM3.30 (based on sum-of-parts) with potential upward revision. The RM36bn MRT project will be the key catalyst for the stock in the near term.
MRT decisions by year-end? Management indicated that both parties, Gamuda-MMC JV is currently in advanced discussions with the government for the proposed RM36bn MRT project. It was presented to the government in January this year. The construction works of the MRT is targeted to kick-start by Jan 2011, if everything goes as planned and all necessary approvals are obtained from the relevant parties. Besides being a project manager, Gamuda-MMC indicated that they are targeting to undertake the underground portion of the works, estimated at 30% of the total project or RM11bn. Meanwhile, the remaining 70% or RM25b for above ground will be tendered out to other contractors with Gamuda-MMC JV being the project manager. Gamuda-MMC JV is banking on its track records for the RM11b electrified double tracking project as well as the construction of the Kaohsiung MRT project in Taiwan to secure the proposed project.
Three MRT lines, divided into 2 phases. The MRT project will be divided into two phases valued at RM23bn and RM13bn, respectively. As indicated earlier, there will be three lines for the proposed MRT: Damansara to Serdang, Kepong to Cheras and a circle line surrounding the city centre. The circle line will connect the two new MRT lines, the existing LRT lines as well as the monorail line.
Updates on SPLASH. According to The Edge Daily reported earlier this week, the water saga may have been broken with all parties agreeing on pricing and the operations and maintenance concessions. We expect the Selangor water consolidation to reach its final decisions by year-end as it has long been overdue. We are confident that any development of this water issue would be positive for Gamuda.
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