(Dec 6, RM3.76)
Maintain buy at RM3.75 with a revised target price at RM4.45 (from RM4.35): Ganuda’s 1QFY11 results, to be announced mid-December, should meet our revised RM355 million FY11 net profit forecast (+2%). Property sales have surpassed expectations with RM350 million locked in 1Q, against the RM880 million internal full-year target. The government’s decision on the Klang Valley MRT project may continue to favour Gamuda-MMC. This positive news flow would support a higher share price level. Retain “buy” with a raised RM4.45 (+2%) RNAV-based target price.
We expect an improved 1QFY11 (circa RM80 million net profit), leading to a 24% growth in full-year net profit. FY11 construction earnings should rise on higher works momentum (RM4.2 billion outstanding as at end-July, ex-Nam Theun 1) and margins recovery. We forecast 6.2% blended gross margin in FY11 against 5.2% in FY10. Property earnings in FY11 should be stronger on record sales in FY10 [RM820 million, of which RM560 million was unbilled at the close of FY10]). Tolled expressways meanwhile will receive a boost from a 31% rise in toll rates on Lebuhraya Damansara-Puchong in early-2011.
In 1QFY11, RM350 million locked-in sales made up 40% of the RM880 million internal target for FY11. Sales at Botanic, Jade Hills and Horizon Hills have surpassed expectations. Annualising 1Q sales implies RM1.4 billion new domestic sales in FY11. In Vietnam, Tan Thang’s maiden launch has been deferred to Feb 2011 (from 1QFY11), due to a new decree which has led to more administration for launches before foundation work can complete. The new launch date coincides with the completion of the work. The RM700 million FY11 sales target for Vietnam is unchanged (Tan Thang: RM300 million, Yenso: RM400 million).
Recent media reports suggest that the National Economic Council’s decision is forthcoming on the MRT project. Gamuda-MMC is vying for the chariot master/project delivery partner (PDP) role. If successful, Gamuda-MMC will implement the project on behalf of the government, rather than taking the entire RM36 billion works into its order book. Gamuda-MMC will also take on the delivery risks (cost and timing), hence, ring-fencing the risks by the government. In addition, open bids for all parcels of work will ensure cost efficiencies. We have imputed a 50 sen per share potential in our RNAV-based target price. — Maybank Investment Bank Bhd Research, Dec 6
This article appeared in The Edge Financial Daily, December 8, 2010.
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