1Q18 CNP of RM203.0m is inline at 27%/26% of our and street’s full-year estimates. 6.0 sen dividend declared, inline with our full-year target of 12.0 sen. No changes to our FY18/19E earnings. Maintain OUTPERFORM with an unchanged Target Price of RM5.45.

Inline. 1Q18 CNP of RM203.0m came in within expectations at 27%/26% of our and street’s full-year estimates, respectively. 6.0 sen dividend declared, on track to meet our full-year target of 12.0 sen.

Results highlight. 1Q18 CNP grew 25%, YoY underpinned by an impressive revenue growth of 52% driven by its construction (+49%) and property (+88%) division. The improvement in construction division was due to higher work progress achieved for MRT2, while the improvement in property division was backed by better sales contributions from overseas and local established projects such as Horizon Hills, Jade Hills, The Robertson, and new project launches in Gamuda Gardens and twentyfive.7. QoQ, 1Q18 CNP grew 19% albeit a flattish revenue growth of 3% largely due to better contribution from its associate and joint ventures (+24%) as MRT2 progresses, coupled with lower financing cost (-17%).

Outlook. Outstanding orderbook comfortably stands at RM7.3b and management is targeting to secure RM10.0b worth of jobs from Pan Borneo Sabah, and ECRL projects. That said, GAMUDA along with their joint-venture partner, MRCB, are looking to bid for the PDP role for HSR, which we believe that they stand a good chance given their track records as PDP in MRT and LRT3. As for its property division, GAMUDA managed to rake in RM903.0m worth of sales in 1Q18, bringing its unbilled sales to RM2.1b with 3-year visibility.

No changes in earnings and recommendation. Post results, there are no changes to our FY18/19E earnings.

Maintain OUTPERFORM with an unchanged Sum-of-Parts driven Target Price of RM5.45. Given the recent retracement in share price due to the absence of PDP role for MRT3, we believe that current price levels open up buy on weakness opportunities for GAMUDA, especially when its earnings deliveries are on track. At current levels, GAMUDA is currently trading at FY18E PER of 18.1x, below its 5-year +1.0SD levels.

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

Source: Kenanga Research - 18 Dec 2017