Results

• Gamuda reported 3QFY17 results with revenue coming in at RM839m (-2% QoQ, +80% YoY) and earnings of RM171m (+3% QoQ, +12% YoY).

• Cumulative 9M revenue summed to RM2.2bn (+26% YoY) while earnings amounted to RM499m (+5% YoY).

Deviation

• 9M earnings made up 74% of our full year forecast (71% of consensus) which is within expectations.

Dividends

• 2 nd interim dividend of 6 sen was declared, bringing the cumulative amount to 12 sen (unchanged YoY).

Highlights

• MRT2 progressing as planned. MRT1 has been completed and will commence full operations in mid-July. For MRT2, 90% of the awards totalling RM29bn have been dished out. Progress rate on MRT2 is at 6% with mostly preliminary works being undertaken (e.g. utilities relocation, earthworks, foundations, excavation, ground treatment, retaining walls).

• MRT3 being finalised. Project details on the MRT3 (i.e. Circle Line) is currently being finalised by SPAD. Cabinet approval is anticipated by mid-2018 with project rollout in early-2019. The circle line will integrate with other radial lines from the MRT, LRT, Monorail and KTM via its orbital alignment, commonly known as the “wheel and spokes” concept. As it will pass through densely populated areas with high buildings, a large portion of its alignment will be underground. This plays in Gamuda’s favour as it can undertake a higher degree of underground works given its experience with MRT1 and MRT2. Media reports have stated that the MRT3 could span 45-48km in length and cost RM50bn.

• Strong recovery for property sales. Property sales in 3Q amounted to RM620m, bringing the YTD sum to RM1.4bn. This marks a strong recovery compared to RM575m in the same period last year. The Kundang township has been launched while Gamuda Gardens and Twentyfive.7 will be launched in 4Q. Unbilled sales stands at RM2bn, implying cover ratio of 1.8x on FY16 total property revenue.

Risks

• Non approval or delays for Penang Transport Masterplan.

Forecasts

• Unchanged as the results were inline.

Rating

Maintain BUY, TP: RM6.24

• Gamuda’s earnings upcycle is poised to hit another round of multi-year highs in FY18 and FY19. It is also a key play to ride on the upcoming mega rail projects such as the LRT3, ECRL and HSR.

Valuation

• While there are no changes to our estimates, our SOP based TP is raised from RM5.74 to RM6.24 as we roll forward our valuation horizon from CY17 to FY18 (July). This implies FY17-18 P/E of 22.3x and 19.3x respectively.

Source: Hong Leong Investment Bank Research - 28 Jun 2017