RHB Investment Research Reports

Gamuda - Outperformed; Positives Already Priced in

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Publish date: Thu, 30 Jun 2022, 12:01 PM
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An official blog in I3investor to publish research reports provided by RHB Research team.

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  • Still NEUTRAL, new SOP-based MYR3.62 TP from MYR3.55, 6% upside with c.4% yield. Gamuda’s 9MFY22 (Jul) core net profit stood at MYR551m (+46.8% YoY) and met 92% and 89% of our and Street’s full- year estimates – exceeding expectations. The positive deviation was mainly due to better-than-expected sales booked for its property business. The stock is trading near its 5-year historical mean P/E. Most of the positives stemming from overseas contracts and the Mass Rapid Transit 3 (MRT3) project have been priced in at this juncture.
  • Construction segment recorded a PBT of MYR264.5m (+27.5% YoY) for 9MFY22. This was partly due to more provisions being written back and recognised in the bottomline, as the Mass Rapid Transit 2 (MRT2) project is nearing completion at 93% physical progress. As such, the segment’s PBT margin was stronger at 19.7% in 9MFY22 (9MFY21: 15.2%).
  • Higher contribution from property development arm. On further scrutiny, Gamuda’s property segment contributed 36.6% to total PBT in 9MFY22 compared to just 18.3% in the same period last year. This was on the back of a >100% YoY expansion in PBT for the property segment, aided by a 23% YoY increase in domestic and overseas property sales, reaching MYR2.7bn (9MFY21: MYR2.2bn) during the period.
  • Outlook. As at 30 Apr, Gamuda’s construction orderbook stands at MYR12.4bn. Potential new jobs, aside from the MRT3, is the North Eastern Link project – Northern Section in Melbourne, with a value of roughly AUD2bn, involving roadworks. Tenders are expected to be out in 3QCY22/4QCY22 with the outcome known in 1QCY23. With regards to the highway disposal deal, it is nearing completion, with an EGM to be held in mid-July to secure shareholder approval, with sukuk raising to commence thereafter. Management expects the deal to be completed in August.
  • Earnings estimates and valuation. As YTD FY22 earnings exceeded our estimates, we adjust FY22F earnings upwards by 26%, imputing stronger property sales and higher provisions written back. Meanwhile, we are reducing our FY23/FY24 earnings estimates by 24%/14% amid the net effect from: i) A slightly higher FY23F construction PAT (due to more provisions being restored as MRT2 nears completion in CY22) and ii) absence of the toll highway contribution, given the progress of the highway disposal deal which is nearing completion. Following the higher FY23F construction PAT in our SOP, we arrive at our new MYR3.62 TP, which includes a 2% ESG premium based on our in-house methodology. A rerating catalyst is the possible rollout of the Bayan Lepas Light Rapid Transit (LRT) project. Upside/downside risk to our call: Acceleration/delays in job replenishment.

Source: RHB Research - 30 Jun 2022

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