Results 

12MFY14  core  PATAMI,  grew  by  9%  to RM712.3m, making up  99%  and  98%  of  ours  and  consensus  estimates respectively.

Deviations 

• Full year PATMI inline with estimates.

Dividends 

• No  dividend  was  declared  during  the  quarter.  Full  year  DPS amounts to 12 sen/ s hare (FY13: 12 sen) translating to a full year yield of 2.5%.

Highlights

Below are the salient points from yesterday’s briefing.

Timing differences.  On a pre FRS11 basis, 4Q construction PBT  declined  -20.9%  yoy  and  -40.5%  qoq,  mainly  due  to timing  diff erences  on  the  MRT  job.  The  MRT  SBK  line  is progressing  well  with  the  underground  and  PDP  works  52% and 35% completed  respectively.  

KESAS  contributes.  The  4Q  slowdown  in  construction  PBT was  made  up  by  higher  contribution  from  concessions (+63%  yoy,  +70. 5%  qoq)  following  the  consolidation  of earnings  from KESAS (2 month impact) after Gamuda raised its stake from 30% to 70%.

Slight  delays  in  MRT2.  Announcement  on  the  Cabinet approval  for  the  MRT  Line  2  is  expected  to  be  delayed  to year  end.  This  is  due  to  the  Government’s  decision  to appoint  an  external  consultant  to  evaluate  the  suitability  of its alignment.

Property  sales slow down.  Property sales  for FY14 came in flat  at  RM1.8bn  (+3%  yoy).  This  follows  from  a subdued  4Q with  only  RM300m  sales,  dragged  by  weak  performance  in Iskandar.  Management  is  targeting  to  maintain its sales into FY15 but this hinges on a pickup in Vietnam.

Water  restructuring.  With the Selangor Menteri Besar (MB) saga  resolved,  talks  between  the  state  and  Federal government  is  expected  to  resume.  Management  is  hopeful that  a  more  reasonable  offer  for  SPLASH  can  be  achieved with a new MB now in place.

Foreign  shareholding.  As  of end  Aug, foreign shareholding has reduced  further  to 29% vs . 38% in Jan  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 

• Unchanged  as results were inline.

Rating  HOLD

While  Gamuda  is  perhaps  the  best  proxy  to  the  MRT  play, we reckon that delays in the announcement of line 2 will cap any  share  price  upside.  Downside  to  property  sales  is  also another  risk factor. As such, we retain our HOLD  rating.

Valuation 

Our  TP is  unchanged at RM5.01 based on the SOP method. This implies FY15 P/E of  15.5x which is inline with its 3 year mean of 16x (based  on 1 year forward  earnings)

Source: Hong Leong Investment Bank Research - 30 Sep 2014