Gamuda Bhd
(Dec 15, RM3.03)
Maintain neutral with unchanged target price of RM3.20: The 18.9% drop in Gamuda’s share price year-to-date against a 3.1% decline in the FBM KLCI was due to:
(i) the recent selloff on the equity market amid rising concern over the external environment;
(ii) declining stock interest following its removal from KLCI; and (iii) slowdown in Vietnam property sales due to the weak economy.
Although the valuation looks attractive, the stock is trading at 14 times price-earnings ratio (PER) against its five-year average PER of 25 times, we believe the upside potential is limited due to lack of fresh catalysts apart from the possibility of winning the award for the tunnelling portion of the Klang Valley MRT project.
Gamuda will be removed from KLCI from Dec 19. This should erode interest in the stock especially from foreign investors.
Gamuda’s foreign shareholding fell to about 26% as at Dec 14 from 31% at the beginning of 2011.
Gamuda will announce its 1QFY12 results today. We are expecting net profit to fall by 12% quarter-on-quarter (q-o-q) to RM111.5 million owing to lower contribution from its
construction and property divisions.
We believe this is due to:
(i) slower construction activities during the festive season (Ramadan and Hari Raya Aidilfitri (August and September); and
(ii) margin contraction for the construction division amid high building material costs during the quarter.
Looking at Gamuda’s construction division, the only major ongoing project is the double-tracking (Ipoh-Padang Besar) project, with the balance gross development value (GDV) at RM2.1 billion.
As for its property division, we expect earnings to continue coming from the domestic markets like Bandar Botanic, Horizon Hills, and Jade Hills. Contribution from its Vietnam property operation will slow down in view of the economic slowdown.
We have decided to retain our forecasts for now pending the announcement of the results today.
On that note, we reiterate our target price at RM3.20 which we derive based on a PER of 14 times based on 0.75 standard deviation below its 10-year average PERs and earnings per share of 22.7sen using FY12. We maintain our “neutral” recommendation. — MIDF Research, Dec 15
(Dec 15, RM3.03)
Maintain neutral with unchanged target price of RM3.20: The 18.9% drop in Gamuda’s share price year-to-date against a 3.1% decline in the FBM KLCI was due to:
(i) the recent selloff on the equity market amid rising concern over the external environment;
(ii) declining stock interest following its removal from KLCI; and (iii) slowdown in Vietnam property sales due to the weak economy.
Although the valuation looks attractive, the stock is trading at 14 times price-earnings ratio (PER) against its five-year average PER of 25 times, we believe the upside potential is limited due to lack of fresh catalysts apart from the possibility of winning the award for the tunnelling portion of the Klang Valley MRT project.
Gamuda will be removed from KLCI from Dec 19. This should erode interest in the stock especially from foreign investors.
Gamuda’s foreign shareholding fell to about 26% as at Dec 14 from 31% at the beginning of 2011.
Gamuda will announce its 1QFY12 results today. We are expecting net profit to fall by 12% quarter-on-quarter (q-o-q) to RM111.5 million owing to lower contribution from its
construction and property divisions.
We believe this is due to:
(i) slower construction activities during the festive season (Ramadan and Hari Raya Aidilfitri (August and September); and
(ii) margin contraction for the construction division amid high building material costs during the quarter.
Looking at Gamuda’s construction division, the only major ongoing project is the double-tracking (Ipoh-Padang Besar) project, with the balance gross development value (GDV) at RM2.1 billion.
As for its property division, we expect earnings to continue coming from the domestic markets like Bandar Botanic, Horizon Hills, and Jade Hills. Contribution from its Vietnam property operation will slow down in view of the economic slowdown.
We have decided to retain our forecasts for now pending the announcement of the results today.
On that note, we reiterate our target price at RM3.20 which we derive based on a PER of 14 times based on 0.75 standard deviation below its 10-year average PERs and earnings per share of 22.7sen using FY12. We maintain our “neutral” recommendation. — MIDF Research, Dec 15
