Neutral on Gamuda’s new contract in Taiwan

KUCHING: The research team at MIDF Amanah Investment Bank Bhd ( MIDF Research) remained neutral on Gamuda Bhd’s (Gamuda) new contract in Taiwan via its 70 per cent joint venture for the Marine Bridge project.

Gamuda together with its JV partner, Dong-Pi Construction Co Ltd ( Dong Pi), was awarded a contract for the Marine Bridge project in Taiwan. The letter of award was issued by CPC Corporation Taiwan, a stateowned petroleum, natural gas, and gasoline company.

Post announcement, MIDF Research made no adjustments to its FY19/ FY20 forecasts as the job value falls within its range of contract replenishment assumptions.

“We maintain neutral (on Gamuda) with an unchanged target price of RM2.89. We maintain our call on Gamuda, as we hold firm to our previous stance, largely underpinned by the recent news on proposed highway takeover by the government.”

To note, the job scope involves the construction and completion of marine bridge for third liquefied natural gas ( LNG) receiving terminal at Taoyuan, Taiwan. The proposed marine bridge is 1.23 kilometres long, connecting receiving terminal to a man-made island.

Other works also include 284metre long road embankment, as well as soil investigation, foundation, a temporary bridge and a working platform, together with environmental protection works. An unincorporated JV Co was previously formed to undertake the job, in which Gamuda and Dong- Pi holding 70 and 30 per cents stakes respectively. Scheduled completion is within 44 months, from April 2019 to November 2023.

Based on the JV arrangement, MIDF Research bel ieved Gamuda’s portion of the contract could be worth RM365.2 million, to arrive at new outstanding orderbook of RM10.9 billion.

“This quantum provides earnings visibility for the next three years,” it added.

Since the result announcement, no new updates were provided by management in regard to the highway takeover by the government.

“Hence, detai ls are sti l l scarce to ascertain the probable outcome,” it said. “Nevertheless, we believe the news has elevated uncertainties on Gamuda, putting investors on tenterhooks with overtone of caution.

“In recognition of this, we also do not discount of possible re- rating, should a positive outcome arises from the takeover negotiation.”