Results 

1QFY13 PATAMI grew by 10% to RM145.4m (6.99 sen/share), making up 26% of our forecast and 24% of consensus forecasts.

Deviations 

Largely in line.

Dividends 

Net dividend of 6 sen/share declared, matching 1QFY12’s payout. Ex-date on 4 Jan 13, payment on 23 Jan 13.

Highlights 

Results…. YoY, revenue grew by 20%, while earnings grew by 10%, driven by strong performance in the construction and property division. QoQ, revenue dipped by 20% as 1Q is usually seasonally slower while 4Q results tend to  be the strongest. However, earnings still grew by 4% QoQ due to margins expansion and ~RM28m amortisation charges on revised lower traffic projects which occurred in 4QFY12. 

Construction… The MRT project continues to progress as planned with 5% completion rate and 7% for the tunnelling portion. RM20bn worth of contracts has been awarded with ~RM2bn remaining to be fully awarded by 1QCY13. As  of 1QFY13, Gamuda has ~RM4.5bn outstanding order book, translating to 2.4x FY12’s construction revenue. 

Property… QoQ, new property sales, largely made up of Horizon Hills (60%) and Bandar Botanic (25%), rebounded to RM330m, from RM230m. However, sharply lower than RM450m new sales achieved in 1QFY12. Unbilled property sales stood at RM1.2bn translating to 1.1x FY12’s property revenue. 

Vietnam property market remains weak and sales target of RM350m for FY13 will be substantially revised downwards. Management will adopt the build-then-sell method for Celadon City apartments which has a GDV of ~RM200m, hoping that it will attract buyers upon completion  whileGamuda City will only be launched when demand picks up.   

Tollway and Water… Privatisation talks on Gamuda’s highway assets seem to have died down while the water consolidation exercise remains deadlocked.

Risks 

Execution risk; Failure in securing new projects; Political and regulatory risk; Rising raw material prices; Unexpected downturn in the construction and property cycle; Sharp depreciation of the VND.

Forecasts 

Tweaked earnings forecast slightly, hence FY13 earnings lowered by 2% while maintaining FY14 earnings and introducing FY15 forecast.

Rating

BUY

Positives:

• Catalyst from next phase of the MRT project and Gemas-Johor EDTP project;
• Strategic land banking exercise;
• Rebound in Vietnam property market. 

Negative:

•  Risk aversion appetite from investors due to looming polls.

Valuation 

TP raised by 11% to RM4.28 from RM3.85 based on SOP valuation (see Figure #2).

Source: Hong Leong Investment Bank  Research - 14 Dec 2012