1QFY22 CNP of RM152m came within expectations but 6 sen dividend declared was above. 1QFY22 property sales of RM838m were also within. Its two outstanding Australian tenders’ outcome will be known by Feb-22 for which we/management is hopeful to clinch at least one (c.RM3b each). PSI reclamation can only commence earliest in 2HCY22 upon EIA approval while MRT3 might see tenders in 3QCY22 if everything goes smooth. While property unbilled sales are at a high of RM4.9b; its construction orderbook is crucially low at RM3.8b. Keep FY22/23E estimates and maintain MP with unchanged TP of RM2.80.

Within expectations. 1QFY22 CNP of RM152.4m came within expectations at 26% of ours/consensus full year estimates. After a dividend drought since 1QFY20, Gamuda has re-enacted their bi-annual 6 sen dividend/share tradition this quarter. This exceeded our expectations as we only expected them to re- enact such dividend tradition in 3QFY22.

Sales within. 1QFY22 sales of RM838m (comprising 1/3 Singapore, 1/3 Vietnam and 1/3 M’sia) is within our/managements sales target of RM3.2b/RM3.5b. Our sales target is more conservative then management as we project weaker Singapore sales for the remainder of the year as their sole ongoing OLA project is already 94% sold as of 1QFY22 (another c.RM118m to be sold). Meanwhile, unbilled sales stood at high of RM4.9b (3x cover).

Highlights. 1QFY22 CNP of RM152m declined 29% QoQ mainly due to weaker PAT contribution from construction (-10%) and property (-78%) from weaker margins. This was because in the previous quarter, there were costs savings being recognised from (i) the completion of MRT2 ph1 and (ii) completion of large phase Vietnam property projects. YoY, despite the lower cumulative revenue (- 17%), CNP was up 39% to RM152m on better contributions and margins from all its 3 divisions. Its construction saw better margins from recognition of cost saving as MRT2 ph2 nears completion while property and concession division was better on easier lockdown measures.

Australian tenders to be out in the next 2 months. Management guides that its 2 outstanding tenders worth AUD4.0b (effective stake AUD2.0b) from (i) Sydney Metro West (SMW) Western Tunnel and (ii) SMW Airport Link will be awarded latest by Feb-22 and management is hopeful to secure at least one of it – in line with our assumptions. Meanwhile, Gamuda and Ferrovial have also being shortlisted for Coff Harbour highway project in NSW (AUD1.5b) which will be tendered out in mid-CY22 and award by end-CY22.

Penang South Island (PSI) reclamation to start earliest in 2HCY22. Gamuda is currently updating their EIA submission which will be submitted in 1QCY22 and approval outcome can only be known within 3-6 months from submission. While management is optimistic on a favourable outcome, we are more reserved over the project commencement timeline and approval outcome as the project has already been dealt with 2 unseen setbacks this past year ie (i) Lack of Environment Management Plan as claimed by DOE which delayed reclamation by and (ii) required to resubmit EIA as the Penang South Reclamation was not part of the Penang Structure Plan 2030.

MRT3 is currently awaiting cabinet approval for a PFI/PPP funding model and management anticipate tenders to be out in 3QCY22. In our FY23E estimates, we have yet to impute in any earnings contributions from MRT3 given the fluidity of the situation.

Current construction orderbook stands low at RM3.8b (MRT2 which will complete in FY22 makes up 50%). Should Gamuda fail to secure any Australian projects and commence works on PSI by end-CY22, expect construction earnings to see a sharp drop in FY23.

Keep FY22/23E earnings post results. Within our replenishment forecast, we have imputed reclamation works in PSI to begin in late FY22 coupled with Gamuda securing one Australian project by mid-FY22.

Maintain to Market Perform with unchanged SoP-based TP of RM2.80. While we like Gamuda for its strong execution track record, uncertainties over immediate replenishment prospects from Australia and timing of PSI’s commencement could lead to earnings disappointments and shortfalls.

Source: Kenanga Research - 22 Dec 2021