Gamuda Bhd
(June 24, RM4.96)
Maintain neutral with a higher target price of RM4.96: Gamuda’s nine-month financial year 2015 (9MFY15) profit after tax and minority interests was rather dull (+2.9% year-on-year [y-o-y]) at RM528.5 million, which reflected lower contributions from construction (-10% y-o-y) and property development (-3.6% y-o-y) businesses. However, the results were still within our and consensus expectations, accounting 72% and 70% of full-year forecasts respectively.

As we have expected, earnings momentum continued to taper off with a third quarter (3QFY15) net profit of only RM160.5 million (-9.8% y-o-y and -11.9% quarter-on-quarter). The lower bottom line was largely due to the tail-end progress of the mass rapid transit (MRT) Line 1 underground civil works and lower property progress billings following the slowdown in property presales.

In contrast, the concessions division grew 15.3% y-o-y from an additional stake in Kesas Sdn Bhd. This has helped to offset the shortfall in earnings contribution from its two key segments. A second interim dividend of six sen was declared in the previous corresponding period. This brings in the total to 12 sen per share dividend for FY15.

Based on the revised timeline, the tendering of MRT Line 2 will be called late this year with major civil packages to be awarded in mid-2016 onwards. The public display has also progressed smoothly with no major issues while the appointment of the project delivery partner will be announced shortly there-after. Management also guided that the underground package should now be worth about RM12 billion out of the total of RM28 billion, which is higher than internal projections. — MIDF Research, June 24

This article first appeared in The Edge Financial Daily, on June 25, 2015.