We  maintain  our  BUY  call,  forecasts  and  MYR5.45  FV  after  our  recent visit  to  the  sites  of  the  Klang  Valley  MRT  project  that  gave  us  great comfort that the project is on track. Gamuda is the best proxy to public infrastructure  spending  in  Malaysia,  particularly  the  Klang  Valley  MRT project.  It  is  likely  to  take  the  lead  in  terms  of  reaction  to  fresh  price catalysts given its large market cap, high beta and share liquidity.

- Good  progress  made.  On  1  Oct  2013,  we  visited  two  key  sites  of  the Sg  Buloh-Kajang  (SBK)  MRT  Line  project  comprising  Cochrane  Shaft and  Sg  Buloh  Depot,  as  well  as  drove  by  the  four  northern  elevated sections from Sg Buloh to Semantan Portal. We were impressed by the progress made on the project.  

-Takeaways  and  observations  during  the  field  trip.  These  include:  i) the  successful  deployment  of  the  Variable  Density  Slurry  tunnel  boring machines (TBM), ii) the 162-acre Sg Buloh Depot site was bustling with activities,  and  iii)  MRT  piers  seen  along  Jalan  Sg  Buloh,  Persiaran Surian (Kota Damansara) and Sprint Highway. -

- SBK MRT Line 12-18% complete. As at end-FY13, the elevated portion was  12%  completed  from  8%  three  months  ago,  while  the  MYR8.3bn tunneling portion was 18% done, from 14% three months ago.  

-  Cabinet  to  approve  Line  2  by  year-end?  Gamuda  remains  optimistic that the Cabinet might approve the MYR25bn Line 2 of the Klang Valley project - or the Sg Buloh-Serdang-Putrajaya (SBSP) Line - as well as the appointment  of  the  MMC-Gamuda  JV  as  the  project  delivery  partner (PDP) “soon after the Budget 2014” is announced later this month.   

- Maintain  BUY.  We  like  Gamuda  as:  i)  It  is  the  best  proxy  to  public infrastructure  spending  in  Malaysia  given  its  dominant  role  in  the  Klang Valley  MRT  project,  ii)  It  has  secured  the  best  portions  of  the  Klang Valley  project  as  a  PDP  (6%  fee)  and  contractor  for  the  high-margin tunneling jobs, and iii) It is likely to take the lead in reacting to new price catalysts such as Cabinet approval for Line 2 of the Klang Valley project given  its  large  market  capitalisation,  high  beta  and  share  liquidity.  Our FV is unchanged at MYR5.45.

Source: RHB