News

FY13 core earnings (after adjusting for RM88.7m arbitration losses), grew by 14% to RM630.1m (29.53 sen/share), beating our estimates by making up 106% of our full year forecast, while meeting consensus forecasts by making up 101%.

Deviations

Mainly due to stronger than expected contribution from property division.

Dividends

None. Dividends usually declared in 1Q and 3Q.

Highlights

YoY…. 4Q revenue grew by 37% YoY to RM1.3bn as the construction division achieved a record high revenue of RM1bn. This is due to the accounting treatment for its PDP role in the MRT project which inflates its revenue. However, construction operating profit fell by 8% YoY to RM58.9, with margins contracting to 6% from 9% in 4QFY12. The absence of profit contribution from the EDTP project led to this shortfall. Overall, 4QFY13 core earnings (adjusted for RM2.3m arbitration write-back) fell by 2% to RM165.4m.

QoQ… 4Q revenue accelerated by 47%, buoyed by increased billings in both the construction and property division. However, sequential earnings growth was flattish at 2%.

FY13 results… FY13 revenue grew strongly by 59% to RM3.88bn, driven by the construction division. The property division saw its revenue dipping slightly by 5% to RM1.02bn as the previous year was lifted by land sale of ~RM100m. Overall, core earnings was up by 14%.

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

FY14-15 earnings trimmed by 1.9% and 2.8% respectively as we rollover our forecast model.

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

Raised Target Price by 2% to RM4.51 from RM4.42 based on SOP valuation (see Figure #4) as we rollover our valuation.

Source: Hong Leong Investment Bank Research- 27 Sep 2013