• 1QFY19 core earnings declined -15.7% yoy and -15.4% qoq to RM172m due to the absence of SPLASH contribution; it trailed our estimates and consensus at 27.6% and 26.8%.

• Management guided that orderbook replenishment would be smaller in the near term and would include overseas market. It expects DoE approvals for PTMP sometime in 1Q of 2019.

• Meanwhile, it guided new presales for the property segment at RM4bn in FY19F, led by domestic sales with the official launch of Gamuda Cove.

• BUY with SOP-derived TP of RM3.35; current level implies 5.2% dividend yield at 12 sen DPS p.a. while current orderbook and unbilled property sales provides visibility of at least 3-4 years.

First quarter without SPLASH

Gamuda 1QFY19 core earnings fell -15.7% yoy and -15.4% qoq to RM172m mainly on absence of SPLASH contribution. To recap, it accepted the offer to dispose SPLASH for RM2.55bn to Air Selangor in Aug 2018. This lowers annual earnings by c.RM100m or RM25m per quarter. Still, we are positive on the disposal as it: i) unlocks value as it is over 10x higher than the last offer, and ii) eliminates default risk of RM4.7bn receivables by SYABAS.

Rebuilding orderbooks and hoping approvals for PTMP

In view of the challenging operating landscape, Gamuda started to diversify its orderbook; it secured several projects worth RM0.9bn for building works from various organizations. This boosts its outstanding orderbook to RM11.8bn. It is also exploring various infrastructure projects overseas such as Australia, Singapore, Vietnam and Taiwan, leveraging on its experience in handling large infrastructure contracts (ie. MRT1 and MRT2). As for PTMP, management expects DoE approvals for all elements (Pan Island Link 1, LRT and, Penang South Reclamation) sometime in 1Q 2019.

Targeting RM4bn presales for FY19F

Management targets RM4bn of presales in FY19F from development of new phases/units at its existing domestic projects (ie. Gamuda Gardens, twentyfive.7, and Gamuda Cove) and overseas projects in Vietnam (ie. Hanoi and Ho Chi Minh City). Gamuda Cove showed strong interest with all 118 units fully sold. We expect the project to have strong demand upon its official launch in the next two months and completion of the new Elite highway interchange in 2Q 2019.

Maintain BUY with TP of RM3.35

Maintain BUY with SOP-derived TP of RM3.35. At current share price level, the stock implies a 5.2% dividend yield based on annual 12sen DPS. Its outstanding orderbook of RM11.8bn and unbilled property sales worth RM2.3bn provides earnings visibility for 3-4 years.

Source: BIMB Securities Research - 17 Dec 2018