- We maintain our BUY call on Gamuda with an unchanged fair value of RM5.80/share. This pegs the stock at a 10% discount to NAV/share.
- The Selangor water impasse appears to be drawing to an end with the signing of four agreements between Pengurusan Aset Air Bhd (PAAB) and Pengurusan Air Selangor Sdn Bhd (Air Selangor).
- The four agreements are:- (i) facilities agreement; (ii) lease agreement; (iii) rights of use agreement; and (iv) settlement agreement.
- We understand that these agreements are essentially conditions precedent (CPs) to effect the master agreement that was signed almost a year ago.
- More importantly, the signing of this landmark water pact between the Federal and Selangor governments would likely trigger renewed hopes for Gamuda to realise its water investments in SPLASH.
- Based on our estimates, Gamuda’s water businesses (i.e. Gamuda Water and SPLASH) account for ~RM1.4bil (RM0.59/share) or 9% of our NAV.
- We retain our earnings estimates for now pending more fresh leads on SPLASH.
- Furthermore, we foresee further upside for Gamuda coming from the MRT Line 2 (MRT2) and Penang Transport Master Plan (PTMP) projects.
- Assuming Gamuda has a 50% stake in the Project Delivery Partner (PDP) consortium for the PTMP for a contract value of c.RM9bil as well as an equal stake over the tunneling works/PDP for the RM28bil MRT2, Gamuda’s NAV is set to rise by RM1.26/share (FV: +19% from RM5.80/share to RM6.95/share).
- We nevertheless believe prospects of any special distributions arising from the disposal of its water units largely hinge on the capital requirements for Gamuda under the upcoming MRT2 and PTMP projects.
- Construction works for MRT2 could kick off by mid-2016, and 2017 for PTMP.
Source: AmeSecurities Research - 9 Sep 2015
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GAMUDACreated by kiasutrader | Dec 08, 2015
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