Gamuda to continue strong growth momentum in FY18
KUALA LUMP UR: Ga mud aBhd’ s (Gamuda) results for the financial year 2017 (FY17) generally came in line with expectations and analysts believe that the group will continue its strong growth momentum into FY18, supported by its strong fundamentals and ability to secure major development projects.
In a report, Maybank Investment Bank Bhd’s research arm (Maybank IB Research) said Gamuda’s strong outstanding construction orderbook of RM7.8 billion and unbilled property sales of RM2 billion would lend support to core earnings growth in FY18.
It added, “We expect earnings growth to continue in FY18 with the pick-up in KVMRT 2 works and its tunnelling portion.”
Meanwhile, Ken an ga Investment Bank Bhd’s research arm also pointed out that Gamuda’s outstanding order-book stands comfortably at RM7.8 billion, with Gamda targeting to secure RM10 billion worth of jobs from Pan Borneo Sabah, LRT3, and ECRL projects.
“However, the tender they have put in for LRT3 underground works is currently suspended as there might be an alternative suggestion for an elevated viaduct instead which would lower Gamuda’s chances in LRT3,” it added.
As for its property division, it noted that Gamuda has managed to rake in RM2.4 billion worth of sales in FY17, bringing its unbilled sales to RM2 billion with three-year visibility.
On the other hand, MIDF Amanah Investment Bank Bhd’s research house (MIDF Research) cautioned that its progress in the Penang Transport Masterplan (PTMP) project is ‘worrying’.
“Despite a swelling orderbook of RM8.9 billion, we are worried for the progress of PTMP.
“Currently, extension has been given by the Penang government to Gamuda for 12-months for the project. However, we reckon that regulatory issue such as the environmental impact assessment is an imminent obstacle to Gamuda’s participation in the PTMP,” it opined.
“We favour the light rail transit line from the Penang International Airport to Komtar as the best package in the PTMP for Gamuda,” it added.
Meanwhile, on Gamuda’s performance in FY17, Kenanga Research noted that Gamuda’s FY17 core net profit (CNP) grew 12 per cent, y-o-y underpinned by 37 per cent growth in revenue (inclusive of joint venture revenue).
“The growth in revenue was mainly backed by its construction and property development division, which saw revenue growing by 29 and 67 per cent, respectively, as billings from its on-going projects finally picked up pace, which are the MRT2 and its development project in Vietnam, which made up 56 per cent of its development revenue,” it explained.
On a quarter-on-quarter (q-oq) basis, the research team said, Gamuda registered a decent growth of 18 per cent despite a mild revenue growth of three per cent thanks to improvements in operating margins (two percentage points) mainly driven by its property development division, which registered two percentage points improvements to 12 per cent in margin coupled with strong revenue growth of 63 per cent and lower financing cost (down 44 per cent).
Overall, Kenanga Research retained its FY18E earnings forecast for Gamuda and introduce its FY19E earnings of RM885 million.
It also maintained a ‘market perform’ call on the stock.
Maybank IB Research pegged a ‘buy’ call on the stock while MIDF Research maintained its ‘neutral’ call.
We expect earnings growth to continue in FY18 with the pick-up in KVMRT 2 works and its tunnelling portion. Maybank IB Research