Price Target: RM3.95
Share price: RM3.75
Results
9M11 earnings came in at RM299m (14.6 sen/share) and made up 88% of our full year forecast.
Deviations
The better than expected results were due to higher earnings margins achieved from the construction and property division.
Dividends
Net dividend of 6 sen/share declared, bringing full year dividend payment of 11.25 sen/share (1Q11: 5.25 sen/share). Gamuda usually pays dividend in the 1Q and 3Q.
Highlights
The construction division saw a huge jump in earnings due to increase in operating margins which surged from 8% in the previous quarter to 14%, mainly because of higher value-added works recognised for the EDTP.
As for the MRT project, the management sees concrete progress and expects tender for the tunnelling portion to be called in August/September period with the award by next year. Overall, active outstanding order book for Gamuda stood at RM2.7bn (RM2.4bn from the EDTP), translating to 1.3x FY10’s construction revenue.
Property sales continued to be robust with ~RM350m new sales achieved during the quarter, buoyed by launches in Bandar Botanic, Horizon Hills and Jade Hills. Unbilled sales stood at ~RM1bn, translating to 1.9x property revenue.
As for Vietnam, the official launching of Celadon City has been delayed to end-July from April (pilling works have begun in June), whereas launching for Gamuda City has been delayed to year-end from July.
SPLASH’s (40% associate) RM1.5bn bond repayment will be rescheduled as the Government has bought over the Selangor water bond. Nonetheless, the overall water issue remains unresolved, and Syabas continues to pay up to only 40% of its billings from SPLASH.
Risks
1) Execution risk; 2) political and regulatory risk (both local and overseas); 3) rising raw material prices; 4) unexpected downturn in the construction and property cycle; and 5) continued devaluation of the VND.
Forecasts
FY11, FY12, and FY13 PATMI upped by 24%, 15% and 13% respectively to better reflect the earnings margins and property sales.
Rating
Maintain HOLD call as upside is limited from the current share price.
Valuation :
FD SOP valuation. upped by 9% to RM3.95 from RM3.63.
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