- We maintain BUY on Gamuda with our fair value reduced slightly to RM5.75/share (from RM5.80/share previously). This pegs the stock at an unchanged 5% discount to its estimated NAV, as we trim its FY15F earnings by 6% (FY16F: -1).

- Continuing the trend for the past three quarters, 3QFY15 net profit fell 12% QoQ on lower billings from the civil works portion of the MRT Line 1 as it reaches the tail-end. Tunneling works have been fully completed. In terms of progress for MRT 1, the overall underground and elevated portions are about 68% and 55% completed, respectively.

- We remain upbeat on Gamuda’s order book prospects moving into FY16F. Specifically, we expect the MMC-Gamuda JV to be at the forefront to clinch the tunneling contract for the MRT Line 2 (MRT 2).

- From what we gather, the pre-qualification process for the civil contractors under MRT 2 is on a fast-tracked basis. There are no changes to the timeline – i.e. major awards are due by mid-2016 (tenders: 4Q15). The Project Delivery Partner (PDP) agreement is set to be signed within two months.

- On a similar vein, The Edge Malaysia reported over the weekend that the race to be the PDP for the Penang Transport Master Plan (PTMP) is now down to two, with Gamuda reportedly being one of them.

- For now, our revised FY16F-17F net profit forecasts of RM790mil and RM810mil have not included any potential contributions from MRT 2, PTMP and the newly-acquired landbank in Melbourne and Kota Kinabalu, which imply some headroom for more earnings upgrades.

- While property pre-sales fell 44% YoY to RM280mil (9MFY15: RM810mil), the group remains on track to meet its full-year target of RM1.2bil, we opine. Management is now more sanguine on the property sector’s prospects – the market appears to have bottomed with more visible signs of a recovery next year. A 50% Gamuda led JV has also emerged as the highest bidder for a 3-acre piece of land in Toa Payoh, Singapore.

- The group recently acquired a 19-acre parcel in Kota Kinabalu for RM100mil. It plans to develop 1,500 units of apartments with a GDV of RM710mil over eight years.

- At the same time, the group hopes to resume negotiations on SPLASH pending a resolution on the master agreement between the Federal and Selangor governments. Collectively, Gamuda’s water businesses (Gamuda Water + SPLASH) accounts for RM0.57/share or ~9% of its SOP. Gamuda’s foreign shareholding level stood at ~27% as at the end of last month (early May: 29%).

Source: AmeSecurities Research - 24 Jun 2015