Period   4Q12/12M12

Slightly above our expectations  by  9%  but  within the consensus. The full-year core net profit of RM534m came in at 109% and 102% of ours and the consensus' FY12 full year estimates.  

Dividends  As expected, no dividend was declared for the quarter under review. 

YoY, the 4Q12 core net profit of RM160m increased by  27%  on  the  back  of  a  20%  rise  in  the  revenue. The main support came mainly from the property division with an expanded pre-tax margin from 17% to 28%.The property revenue increased by 20% supported by strong sales from its Horizon Hills development.   

QoQ, the core net profit has increased by 30% due to the higher revenue recognition from the ongoing construction projects like the double track railway and MRT tunnelling works (+71%). However, the pre-tax margin for construction dropped from 15% to 9% as the lucrative double track project was already at the tail end of the project (YTD stage of completion at 86%). The MRT tunnelling works could be contributing lower margins as the progress is still at the preliminary stage.  

YoY, the FY12 core net profit of RM534m is the second record-breaking year for Gamuda. It was 33%  higher  on  the  back  of  a  15%  increase  in revenue. The overall pre-tax margin has improved from  20%  to  24%  as  its  property  margin  had stabilised at 27%.  

Outlook  The current order book stands at RM4.8b until 2017. The big chunk of the contract value comes from MRT tunnelling works (RM3.9b). The tender book stands at RM10b, which comprises of MRT Line 2, Line 3 and Gemas-Johor EDTP. 

We reckon that new contract awards are likely to take place only after the elections.  

We have tweaked our FY13E earnings higher by 6% as we have increased our revenue projection for its property division.  

Rating  Maintain OUTPERFORM

Our OUTPERFORM rating is maintained as our Target Price implies a 21% upside from the current share price.

Valuation   We are maintaining our TP at RM4.13 based on a lower multiple of 15x from 16x FY13 earnings as we expect the weakening sentiment on the construction sector to affect the share price performance.

Risks  Constructions delays and cost overruns.