GAMUDA BHD

By Hong Leong Investment Bank Research Buy Target price: RM6.36

ACCORDING to Hong Leong Investment Bank Research (HLIB), Gamuda’s order book stands at RM16bil (including MRT2 PDP), implying a strong cover of 6.6 times on its 2016 construction revenue.

The research house said management is hopeful to add at least RM10bil to its bag over the next one to two years.

“Key jobs eyed include the East Coast Rail Link (ECRL), MRT3, High Speed Rail (HSR) and Pan-Borneo Sabah.

HLIB said public display of the mammoth 600km ECRL (RM55bil) ended in June with initial awards expected in the fourth quarter of 2017.

“Although China Communications Construction Co is the lead contractor, we gather that 30% to 40% (RM16bil to RM22bil) of the works would be sub-contracted to locals.

“Management guides that it is eyeing a sizable portion of these sub-contracts and will leverage on its track record with the Northern Double Track.”

HLIB also said project details on the MRT3 (Circle Line) is being finalised by the Land Public Transport Commission.

“Cabinet approval is anticipated by mid2018 with project rollout in early-2019. MRT3 will integrate with other radial rail lines via its orbital alignment, commonly known as the “wheel and spokes” concept.

“As it will pass through densely populated areas with high buildings, more than 50% of its alignment will be underground. This plays in Gamuda’s favour as it can undertake a higher degree of underground works given its experience with MRT1 and MRT2.”

The research house said preliminary esti- mates placed the MRT3 cost at RM40bil.

“Gamuda’s earnings upcycle is poised to hit another round of multi-year highs in 2018 and 2019. It is also a key play to ride on the upcoming mega rail projects such as the ECRL and MRT3.”