4QFY20 CNP of RM131m* lifted FY20 CNP to RM520m – slightly above our expectations (at 106%) due to stronger than expected highway contributions but within consensus (at 100%). No dividends as expected. No change to FY21 earnings and introduce FY22E earnings of RM589m. Overall, we remain optimistic on GAMUDA which will remain the biggest beneficiary of any pump priming initiatives – hence, maintain OP and TP of RM4.10.

Marginally above our expectations. 4QFY20 CNP of RM131m* lifted FY20 earnings to RM520m – slightly above ours (at 106%) but well within consensus (at 100%). The positive deviation against ours is due to the stronger-than-expected contributions from their highway assets (LDP, Kesas and Sprint) attributable to strong rebound in traffic post lockdowns and lower maintenance costs. Meanwhile FY20 property sales of RM2.2b was within our/management’s RM2.0b target. No dividends as expected.

*We have excluded the RM148m one off impairment of their IBS plant to derive our core earnings. This impairment arose from Gamuda’s decision to mothball their Sepang IBS plant due to the weak demand landscape and only operate from their Banting IBS Plant.

Highlights. 4QFY20 CNP of RM131m increased 225% QoQ due to the less severe MCO disruptions whereby most construction and business activities gradually restarted at the beginning of 4QFY20 ie when CMCO commenced on 4th May. Needless to say, FY20 CNP of RM520m was down 28% YoY from the unprecedented Covid-19 crisis lockdowns.

FY21 is poised to be an exciting year for Gamuda’s construction segment as they are (i) vying for their first major Australian project, (ii) hopeful that MRT3 will get the Federal’s greenlight, and (iii) officially commence reclamation works at Penang South. Current order-book of RM6.9b provides 2x cover with a bulk (RM4.6b) of it derived from MRT2.

Meanwhile, management is guiding FY21 property sales target of RM3.5b; from which RM1.3b are local and RM2.2b international. We are slightly less optimistic on the local front and hence only project FY21 sales of RM3.2b. Unbilled sales of RM3.3b would last the group 2 years.

No changes to FY21E earnings and introduce FY22E earnings of RM589m. Note that the 13% YoY decline in our FY22E estimates is mainly due to (i) the loss of contribution from MRT2 project as it completes in FY21E coupled with (ii) the ramp up of new projects being gradual. We have built in a cumulative replenishment assumption of RM5b for FY21E and FY22E or an average of RM2.5b/annum.

Maintain OUTPERFORM and SoP-based TP of RM4.10. We continue to like GAMUDA for their dominant position over the construction space in Malaysia which is bound to benefit from any pump priming initiatives.

Risks to our call include: (i) no MRT3 project, (ii) wide resurgence of Covid-19, and (iii) a snap election.