Gamuda is the best proxy to the buoyant construction sector, given its dominant role in the MRT and PTMP projects. Nonetheless, we believe the recent share price run-up may have already priced in its potential role in the underground portion of MRT2 and other related potential jobs. As a result, we downgrade the company to NEUTRAL with an unchanged SOPbased TP of MYR5.15 (7% upside).

Market expectations factored in. The Klang Valley Mass Rapid Transit Line 1 (MRT1) has reached an overall 79% completion. Meanwhile, Gamuda has beenappointed project delivery partner (PDP) for the MRT Line 2 (MRT2) contract. While management hinted that the underground portion for MRT2 may be 40% larger than Line 1 and that the result of the tender would be known fairly soon, we believe the market has already assumed that Gamuda would win this projecttogether with its partner MMC Corp (MMC MK, BUY, TP: MYR3.40). Separately, we expect the Penang Transport Master Plan (PTMP) project to kick off in 2HFY18 (Jul). Property sales, on the other hand, are expected to be slower than our assumption of <MYR1bn on prolonged weakness in the property market.

Downgrade to NEUTRAL. Gamuda remains the best proxy to the buoyant construction sector in Malaysia given its dominant role in the MRT and PTMP projects. However, its recent share price run-up to near our SOP-based TP of MYR5.15 – which implies 20.7x/18.2x FY16-17 P/Es respectively – suggests that the market may have priced in its potential new job win s (as mentioned above). Thus, we downgrade the stock to NEUTRAL (from Buy).

Forecasts and risks. We deem its 1HFY16 result to be largely in line with our estimates despite reaching 53.6% of our and 49.8% of consensus estimates. Therefore, we make no changes to our forecasts. Risks are delays and cost overruns in construction jobs, and weaker-than-expected property sales.