News

9MFY13 core earnings (after adjusting for RM91m arbitration provision), grew by 21% to RM464.7m (22.2 sen/share), making up 78% and 79% of ours and consensus forecasts respectively.

Deviations

Due to stronger construction and property profits.

Dividends

Net dividend of 6 sen/share declared, bringing full year payout to 12 sen/share and match HLIB’s projection. Dividends usually declared in 1Q and 3Q. Ex-date on 15 Jul- 13, payment on 31 Jul-13.

Highlights

Results review…. 3Q revenue grew by 28% YoY and 3% QoQ while core earnings (adjusted for arbitration provision and partial Celadon land sale gain in 3QFY12) grew by 24% YoY and 4% QoQ. Earnings growth was mainly driven by its construction and concession divisions which mitigated the flattish performance in the property division.

Construction… The KVMRT progress on the PDP scope and underground works stood at 8% and 14% respectively. There are slight delays in the elevated works due to utilities relocation issues, but management believes that it is still manageable. Outstanding order book stood at RM3.9bn, translating to ~2.1x FY12’s construction revenue.

Property… New property sales picked up during the quarter to achieve new sales of RM400m, bringing YTD new sales of RM1bn. Horizon Hills made up ~RM600m of the new sales achieved. Management has revised up their property sales target to RM1.6bn for FY13, and has already achieved news sales of RM200m in the 1st month of 4QFY13, mainly from launches in Horizon Hills. Unbilled property sales remained unchanged at RM1.2bn, translating to ~1.1x FY12’s property revenue.

Another Kota Kemuning… Management intends to replicate their Kota Kemuning township success in the recently acquired land in Rawang. Gamuda has also acquired another 89 acres land in Kundang, Rawang, for RM47m (RM12/sq ft) with a potential GDV of RM500m (see Figure #4).

Foreign shareholding… Foreign shareholding climbed to 48% as of end May from 43% in Jan-Feb period. The previous high was 64-65% in 2007.

Risks

Execution risk; Failure in securing new projects; Political and regulatory risk; Rising raw material prices; Unexpected downturn in the construction and property cycle; Sharp depreciation of the VND.

Forecasts

We are cautious on the construction margin when the actual tunnel boring works begin in 4Q. Hence, we maintain our earnings forecast.

Rating

HOLD

Although prospects for Gamuda remains bright, we believe that much of the positive catalysts have already been factored in its share price. Given that the current price has exceeded our TP slightly, we maintain our HOLD call.

Valuation

Maintain TP of RM4.42 based on SOP valuation (see Figure #5).

Source: Hong Leong Investment Bank Research - 28 Jun 2013