Eye on stock

JUDGING by the significant movement in Gamuda Bhd’s share price over the last two weeks, it appears that many see it as a likely beneficiary of the huge 10th Malaysia Plan (10MP) public transport plan.

Some believe that Gamuda has a fair chance of carving out a significant chunk of the RM50bil Mass Rapid Transit (MRT) system contract, given its strong balance sheet, tunnelling expertise, track record and ownership of the project concept.

The MRT project was pitched to the Government by Gamuda and MMC Corp Bhd, which built the RM2bil Storm-Water Management and Road Tunnel to alleviate flooding in Kuala Lumpur.

Analysts think the MRT project may well take off, as it is in line with the Government’s plans for a gradual phase-out of petrol subsidies.

“Just based on a 50% share of the tunnelling works and a net margin of 10%, this contract could potentially lift Gamuda’s fair value by 26 sen per share to RM4.08 and double its outstanding orderbook to RM13bil,” said an AmResearch analyst.

Meanwhile, Gamuda’s net profit for third quarter ended April 30 was 35.7% higher at RM73mil, taking its nine-month earnings to RM204mil.

Earnings rose 35.7% thanks to better contributions from its construction and property divisions.
Meanwhile, the restoration of construction margins is gaining traction and is now rising to 5.2% as of the third quarter against 4.3% in the previous quarter as work progresses on its double-tracking project.

By Tee Lin Say
thestar.com.my