We see the progress in the construction of the first KV MRT line as a boon for Gamuda, which is set to see its earnings soar to a record high over the next two years. The group is likely add potential jobs such as the remaining two MRT lines, the Gemas-Johor Bahru double track, as well as the Langat 2 water treatment plant to its existing RM4.5bn-strong orderbook, which would in turn spur interest in the stock. Maintain BUY, with our SOP-based FV at RM4.90.
MRT largely on track. Works on the underground portion of the Sungai Buloh-Kajang (SBK) MRT line is largely on track while preparatory works have started at all seven underground stations. Gamuda has procured 10 tunnel boring machines, of which the first two units will be delivered by end-March 2013. On the MRT's elevated portions, management has guided that works at all the viaduct packages are largely progressing on schedule. To date, 54 packages worth more than RM20bn have been awarded, while the remaining 32 packages totalling RM2bn-RM2.5bn will be handed out by end-1QCY13.
Property unit buoyed by local sales. Gamuda registered RM330m worth of property sales in 1QFY13, falling short of its previous full-year guidance of RM1.7bn but in line with our FY13 forecast for RM1.35bn, with unbilled sales at RM1.2bn. While the Vietnamese property market has yet to show any affirmative signs of rebounding, the company's local property sales have remained resilient, driven by continued interest in Bandar Botanic in Klang and Horizon Hills in Iskandar Malaysia. The year's new launches include Madge Mansions near Jalan Ampang and The Robertson along Jalan Pudu.
Potential jobs ahead. Gamuda's outstanding construction orderbook stands at RM4.5bn. With works on the SBK line largely on schedule and its double-tracking contract approaching the tail-end, attention will shift to securing new jobs in the near term. Management believes that at least one of the two remaining KV MRT lines may be awarded by end-CY13. The feasibility studies conducted by independent consultants have been completed while discussions are now underway between MRT Corp, the Land Public Transport Commission (SPAD) and the relevant authorities. With the general election now likely to be held in 1HCY13, we expect more news relating to the RM8bn Gemas-Johor Bahru double-tracking project, for which Gamuda will be partnering China Railway Construction in a joint bid, as well as the potential award of the Langat 2 water treatment plant in 2H next year.
BUY. We continue to like Gamuda's strong execution, and with works on the SBK line largely intact, the company looks set to post its most profitable year yet. Moreover, we see it as the biggest beneficiary when the remaining two MRT lines are to be implemented come 2H13. Maintain BUY, with a SOP-based FV of RM4.90.