PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 26 Nov 2020, 11:22 AM


Gamuda Berhad - Decent Performance

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Gamuda’s core net profit in 4QFY20 came in better than expected at RM130.7m (>100% QoQ, -34.7 YoY) due to higher than expected billings and margins from its construction business and steady income from its concessions. During the quarter, the Group’s reported net profit was dragged down by impairment of IBS assets totaling RM148m however, as it temporarily shut down one of its two IBS plants due to the slower pace of building construction induced by stringent Covid-19 standard operating procedures (SOPs). Reported PBT and net profit fell 33% and 47% to RM649m and RM372m respectively. We understand that no further impairment is expected, and the Group expects to be able to restart the closed plant once demand for the IBS products recovers. Earnings estimates are kept unchanged. Maintain our Neutral call with SOTP-derived target price of RM3.43.

  • Earnings dropped in most divisions. For FY20, Group core net profit of RM517.8m (-28.0% YoY) was above our estimates but within consensus. As reported earlier, a near 8-week total lockdown due to the pandemic which impacted Q3 the most, also weighed on Q4 which was troubled by slow and uneven recovery in operations following several weeks of gradual and cautious re-openings of various economic sectors. As such, the Group’s core PBT dropped 17% YoY to RM797m.

    We understand that its construction business recovered quickly post lockdown as the full impact was mitigated by the MRT2 underground tunneling works continuing during the total lockdown, and the active planning and preparation works which paved the way for a quick resumption of project activities post lockdown. For the year, the division posted a modest 10% fall in core PBT to RM296m.

    Properties remained weak as purchasers deferred decisions amidst economic uncertainties ahead with the domestic sector performing worse than the overseas sectors (Vietnam, Singapore). The property division posted a 46% fall in core PBT to RM180m.

    Meanwhile, concessions remained steady as traffic volumes rebounded post-lockdown, whilst lower operational costs at both the highway and water units helped support y-o-y growth. Also, the water unit was relatively unaffected by Covid-19 as water demand remained resilient throughout the year. All in, the division posted a 6% increase in core PBT to RM322m in FY20.
  • Construction orderbook dropped to RM6.9bn (from RM7.5bn). As for job replenishments, we understand that KVMRT3 is edging closer to a decision soon. As for PTMP, reclamation works for Island A is likely to commence next year, with the PDP to provide funding to the state government of up to RM1.3bn, with expected PDP fees ranging between 5.0% and 5.75%. For overseas jobs, it is shortlisted for 2 major projects in Australia – both projects, the Sydney M6 motorway, and 2 tunnel packages under the Sydney Metro West project, require extensive tunneling capabilities. Outcomes of the bidding for the projects are expected by mid-21 (M6), and late-21 (Metro West) respectively. It is targeting to be shortlisted for another major infrastructure-related project in the next 6-9 months.
  • Property pre-sales dropped 29% YoY to RM2.18bn. Gamuda sold ~RM1bn in Q4 alone, sharply recovering from the RM0.2bn achieved in Q3 amidst the lockdown primarily driven by overseas projects. Top selling projects include Celadon City, the newly launched OLA Residences, Gamuda Cove and Horizon Hills. Unbilled sales stood at RM3bn as at 4QFY20.

Source: PublicInvest Research - 28 Sept 2020

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