• Gamuda’s 3QFY17 earnings slightly below expectations

• Earnings influenced by 2 key segments

• Reaffirm earnings estimates

• We maintain our BUY recommendation with an unchanged TP of RM5.50

3QFY17 earnings met expectations. Gamuda’s earnings of RM162.1m (+0.6% YoY) is slightly below expectation registering only 23.0% and 20.0% of ours and consensus’ expectations.

Earnings impacted by 3 key segments. The earnings is impacted by toll hikes, improvement from sales of units in Vietnam and Singapore property development but tapered by lower earnings from construction segment which sees billings decreasing due to project completion of KVMRT1.

Impact on earnings. Nonetheless, construction segment will still lead the way due to the initial works of the KVMRT2 and upcoming Penang Transport Masterplan which comprises of; (i) LRT from Komtar to Penang International Airport, (ii) Pan Island Link highway and (iii) reclamation works. We reckon that the property sales from GEM Residences, Singapore and Celadon City, Vietnam will continue to improve balancing the effect of weakening property mart in Malaysia. Notably, Gamuda’s total orderbook is RM8.7bn (approximately 48 months of construction backlog or 9.5x total construction revenue cover) provides comfort on FYE17’s performance.

Recommendation. We maintain our BUY recommendation with an adjusted TP of RM5.50 per share based on sum-of-parts valuation (SOP) supported by prospective PER of 18x which is on the higher end of our big cap construction PER range of 14x-19x.

Source: MIDF Research - 19 Dec 2016