GAMUDA?s FY17 CNP of RM700.6m after taking out the one- off fair value impairment of RM98.5m arising from SMART tunnel is within expectations, accounting for 99% of both our and streets? full-year estimates. No dividends declared as expected. We made no changes to FY18E earnings and introduce our FY19E earnings of RM885.0m. Maintain MARKET PERFORM with an unchanged Target Price of RM5.45.

Results inline. FY17 CNP of RM700.6m after taking out the one-off fair value impairment of RM98.5m arising from SMART tunnel is within expectations, accounting for 99% of both our and streets? full-year estimates. No dividends declared as expected, its full-year dividend of 12.0 sen declared in previous quarters was within our expectations.

Results highlight. GAMUDA?s FY17 CNP grew 12%, YoY underpinned by 37% growth in revenue (inclusive of JV revenue). The growth in revenue was mainly backed by its construction and property development division, which saw revenue growing by 29% and 67%, respectively, as billings from its on-going projects finally picked up pace, i.e. MRT2 and its development project in Vietnam, which made up 56% of its development revenue. QoQ, GAMUDA registered a decent growth of 18% despite a mild revenue growth of 3% thanks to improvements in operating margins (+2ppt) mainly driven by its property development division, which registered 2ppt improvements to 12% in margin coupled with strong revenue growth of 63% and lower financing cost (-44%).

Outlook. Outstanding order-book stands comfortably at RM7.8b and management is targeting to secure RM10.0b worth of jobs from Pan Borneo Sabah, LRT3, and ECRL projects. However, the tender they have put in for LRT3 underground works is currently suspended as there might be an alternative suggestion for an elevated viaduct instead which would lower GAMUDA?s chances in LRT3. As for its property division, GAMUDA managed to rake in RM2.4b worth of sales in FY17, bringing its unbilled sales to RM2.0b with 3-year visibility.

No changes in earnings and recommendation. Post results, there are no changes to our FY18E CNP, and we introduce our FY19E CNP of RM885.0m.

Reiterate MARKET PERFORM with an unchanged Sum-of-Parts driven Target Price of RM5.45. At current levels, GAMUDA is currently trading at FY18E PER of 20.1x, above its 5-year +1.0SD levels.

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-than- expected property sales.

Source: Kenanga Research - 29 Sep 2017