FY16 CNP of RM626.1m came inline, making up 98%/99% of our/consensus full-year estimates. No dividend declared as expected. Outstanding order book and unbilled sales stand at RM9.0b and RM1.2b providing visibility for the next three years. Maintain MARKET PERFORM, raised SoP-driven Target Price to RM4.85 (previously, RM4.67). Our TP implies FY18E FD PER of 18.4x.

Within expectations. FY16 CNP of RM626.1m which accounts for 98%/99% of our/consensus full-year estimates was within expectations. No dividends declared, as expected given that GAMUDA normally declares dividends in the first and third quarter of the financial year. For FY16 a total 12.0 sen had been announced, which is slightly below our expectations of 13.0 sen.

A year of decline. FY16 CNP weakened by 8%, YoY driven by softer contribution from two of its major divisions, i.e. construction and property. Its construction and property pre-tax profits slumped by 13% and 32% YoY, respectively. This was mainly due to the tapering of underground and elevated works for MRT1, whilst its property division was hit by a softer market in Malaysia, causing margin to decline by 6ppt to 16%, which we believe is due to higher sales and marketing expenses in order to entice home buyers to their on-going projects. Likewise, its concessionaire business that makes up 53% of its FY16 pre-tax profits improved by 9% backed by the mild recovery in traffic post toll-rate hike. On QoQ basis, CNP saw a marginal decline of 1% despite 17% growth in revenue as the group incurred higher financing cost (+25%), taxation (+139%) and a lower contribution from its associates (-28%).

Interesting year ahead. Currently, its outstanding order book stands comfortably at RM9.0b and management is targeting to secure RM4.0b worth of jobs in the next 12 months from LRT3, Pan Borneo Sabah, Gemas-JB Double Track works. As for its property division, its unbilled sales stand at RM1.2b, achieving RM2.0b worth of pre-sale for FY16 exceeding our and management’s target of RM1.4b due to its Singapore project. As for the Splash takeover by the government, management remains hopeful for a resolution by year-end and they are willing to accept a marginal discount to its 1.0x book valuation at c.RM3.0b. However, should this take place accordingly, we expect the loss of contribution from its water concessions, which contributes c.RM120.0m to its pre-tax profit and management reiterated that there will not be any special dividend from the proceeds.

No changes in earnings and recommendation. We raised our SoPbased Target Price to RM4.85 (previously, RM4.67) on house keeping post its FY16 results. Nonetheless, we still maintain our MARKET PERFORM call on GAMUDA due to the uninspiring outlook of the property sector. However, we expect more construction-related news flow from the roll-out of KVMRT2 and Pan Borneo Highway. Our TP implies FY18E PER of 18.4x, which is in line with big caps’ Fwd. PER range of 16-18x.

Risks to our call include: (i) Delays in MRT1 construction progress, (ii) unexpected delay of MRT2 project, (iii) another deadlock in SPLASH takeover deal, (iv) higher-than-expected input costs, and (v) lower-thanexpected property sales.

Source: Kenanga Research - 29 Sep 2016