Period

1Q16

Actual vs. Expectations

1Q16 net profit of RM161.2m came in well within our and streets’ expectations, accounting for 25% of both full-year estimates.

Dividends

Single tier first interim dividend of 6.0 sen was declared, as expected.

Key Results Highlights

YoY, 1Q16 net profit was down by 13% to RM161.2m, dragged down by all of its division, i.e. construction, property and concessions, which saw compression in margins that ranges from 2% to 14%. The dip in margins for its construction division was mainly due to the completion of its tunneling works.

QoQ, GAMUDA still managed to register 5% growth on its 1Q16 net profit of RM161.2m, despite a lower contribution from its property division, which saw its pre-tax profits down by 13% to RM51.5m, as the impact was cushioned by its construction and concession division that saw a growth of 6%-8% on its pre-tax profits of RM42.7m and RM98.4m, respectively.

Outlook

GAMUDA’s near-to-mid term prospects remained unexciting due to its depleting outstanding orderbook of RM800m, which was due to the transition from MRT1 to MRT2 of which the contracts for MRT2 are expected to be awarded in May-16. That said, the slowdown in the local property sector remains discouraging. Nonetheless, management indicated that they are hungry for more construction jobs and would be actively participating in LRT3, Pan Borneo, and Gemas-JB Double Track works.

Change to Forecasts

Unchanged.

Rating

Maintain MARKET PERFORM

Valuation

We maintain our MARKET PERFORM call with an unchanged SoP-based Target Price of RM4.67, due to the lack of near-term catalysts.

Our TP implies FY16E PER of 16.3x which is inline with big caps’ fwd-PER range of 16-18x.

Risks to Our Call

Delays in MRT1 construction progress

Unexpected scrapping/delay of MRT2 project

Another deadlock in SPLASH takeover deal

Higher-than-expected input costs

Lower-than-expected property sales

Source: Kenanga Research - 17 Dec 2015