Gamuda; Buy; RM4.89
Price Target: RM5.40; GAM MK

Gamuda has proposed to acquire the remaining 70% in Kesas for a total RM875m. This is from Perbadanan Kemajuan Negeri Selangor (PKNS), PNB and Amcorp Properties for RM375m, RM250m and RM250m respectively.

We are surprised on this acquisition as we were made to understand that all of its toll concessions were up for sale apart from the SMART tunnel. In any case, the acquisition will be earnings accretive at just 10x trailing PE as it generates c. RM120m in PAT p.a. We think this acquisition will also help fill the earnings void from the eventual sale of Splash by year-end where special dividends will be forthcoming. Financing will be via some cut back in capex for land banking and its still strong balance sheet.

We maintain our BUY rating and SOP-derived TP of RM5.40 on Gamuda.

Source: HwangDBS Research - 6 Nov 2013