2QFY21 CNP of RM123m brought 1HFY21 CNP in line with our/consensus expectations at 44%/42% of full-year estimates. YTD property sales of RM1.5b also matched expectation. No dividends as expected. 2HFY21 anticipated to perform stronger than 1HFY21 due to lumpy property earnings from its Vietnam development, Celadon City. Maintain FY21-22E earnings estimates and reiterate OP and SoP-TP of RM4.17.

Within expectations. 2QFY21 CNP of RM123m (+13% QoQ; -30% YoY) lifted 1HFY20 CNP to RM232m (-33% YoY), within our/consensus expectations at 44%/42% of full-year estimates respectively. No dividends as expected.

2QFY21 registered property sales of RM0.8b – bringing 1HFY21 property sales to RM1.5b – also within our/management’s target of RM3.3b/RM3.5b.

Highlights. 2QFY21 CNP of RM123m increased 13% QoQ attributed to better water concession performance. Consequently, PAT contributions from its concession division improved (+54%) and cushioned the fall from its construction (-11%) and property (-18%) segments.

YoY, 1HFY21 CNP was lower 33% due to the impact from the Covid-19 pandemic. We highlight that the sharp drop in property contributions (at -79%) was also due to the fact that Gamuda could not recognise earnings from its Celadon City project (Ho Chi Minh) despite construction progress due to delays in securing building approvals arising from the ongoing national elections in Vietnam.

Replenishment prospects. Prospective awards flow from upcoming megaprojects in sequence would be: (i) Australia M6 highway – by 2QCY21, (iii) Sydney Metro West Central Tunnelling Package – by 4QCY21, (iii) Sydney Airport Metro Line – by 4QCY21/1QCY22, (iv) Sydney Metro West Western Tunnelling Package – by 2QCY22, and (v) MRT3 – quickest would be late-CY21.

Balance sheet to be stronger. Currently, net gearing remains healthy at 0.27x and is expected to go down further in 3QFY21 as Gamuda has monetised RM350m worth of receivables owed to its 80%-owned subsidiary Gamuda Water (through asset backed securitisation).

As of 2QFY21, outstanding order-book stood at RM5.5b, mainly comprising KVMRT2 (RM3.4b or 62% of outstanding order-book) which would continue to drive construction earnings till early FY22. Meanwhile, its order-book is poised to be bumped up by RM5b (from PSR land reclamation works) once the JV agreements between Penang State and SRS consortium are finalized.

Maintain our FY21-22E forecasts. We anticipate 2HFY21 to come in much stronger compared to 1HFY21, underpinned by lumpy contributions in 4QFY21 as Gamuda obtains building approvals for Celadon City and recognize the progress completions that were backlogged once the national election in Vietnam, to be held on 23rd of May 2021, is concluded.

Maintain OUTPERFORM with unchanged SoP-based TP of RM4.17. We continue to like Gamuda for their dominant position in the construction space in Malaysia which is poised to benefit from any pump-priming initiatives.

Source: Kenanga Research - 31 Mar 2021