A recent meeting with Management revealed that its construction orderbook is expected to add new jobs to the tune of RM7-8bn by 1H2016 and potentially another RM1-2bn in 2H2016. Among the key jobs eyed are the MRT 2 tunnel works (c.RM6.5bn) and tendering as sub-contractor for other projects such as the Pan Borneo Highway (packages worth RM1.5bn), LRT3 and Gemas-JB double track project. Elsewhere, Gamuda is finalizing PDP contract terms by March 2016 for the Penang Transport Master Plan (PTMP) with physical works expected in 2018 at the earliest. As for the property division, Management expects FY16 sales to grow 10% YoY to RM1.33bn, driven by fast-turnaround projects especially from overseas (Vietnam, Melbourne and Singapore). Maintain Outperform and RM4.90 TP, which is pegged on parity with our sum-of-the-parts (SOTP) valuation

• Penang Transport Master Plan. Physical works are expected to commence once all relevant approvals have been secured in 2017. The approving authorities, among others include the Land Public Transport Commission (SPAD) and the Department of Environment (DOE). Funding is mainly from the state, which we believe will come mainly from the swapping of land reclamation rights. As for potential jobs from PTMP, it might secure as much as 50% of the RM32bn project over two phases (Phase 1: 8 years, Phase 2: 7 years). As for capital requirement, we understand that it needs c.RM4bn for PTMP in the initial stage. This, we believe, will be partly funded by its proposed sale of water assets which is estimated to raise RM1-1.2bn, while the rest will be from bank borrowings. Net gearing could increase to c.100% in 3-5 years from c.40% currently.
• Property. We understand that the Group’s property sales will grow by 10% YoY in FY16 to RM1.33bn. Domestic sales are still weak but we believe its overseas projects will do better this year. As for launches, it will focus on quick turn-around projects such as Highpark Suites (Kelana Jaya, RM600m GDV), Chapel Street (Melbourne, RM400m GDV), Bukit Bantayan (Sabah) and Toa Payoh (Singapore). New townships (such as Seri Serai in Rawang) are still in the planning stages and will probably be unveiled from 2017 onwards. As for landbank, it has c.4,000 acres of land with estimated undeveloped GDV of RM57bn and we understand that it will stop buying more land for now. Separately, its unbilled sales as at Q1FY16 stood at RM1.2bn.
• Maintain Outperform and RM4.90 TP, which is pegged on parity with our sum-of-the-parts (SOTP) valuation. We believe Gamuda, being the prime beneficiary of infrastructure spending, should see its earnings recover in FY17 with contributions from MRT2 and other new jobs.

Source: PublicInvest Research - 3 Feb 2016