Thanks to its key roles in rail projects like the Mass Rapid Transit (MRT), Gamuda Bhd is in a good position to benefit from Malaysia’s flourishing construction industry, reported The Star.
According to AmInvestment Bank Research, the construction company is also “the best proxy” to leverage on the upcoming massive rail projects such as the East Coast Rail Link, the 37-kilometer LRT Bandar Utama–Klang line (LRT3) and the High Speed Rail (HSR) that will connect Singapore with Kuala Lumpur.
In addition, Gamuda would do well for being the project delivery partner in the Penang Transport Master Plan for it would reap the benefits of the next infrastructure boom in the state.
“We maintain our ‘buy’ call, forecasts and sum-of-parts based fair value of RM5.96, which values Gamuda’s construction business at 16 times 2018 net profit, in line with our benchmark one-year forward price-to-earnings ratio of 14 to 16 times for large-cap construction stocks,” said the research house.
AllianceDBS Research is also bullish on the company’s outlook and increased its projected net profit. “We raised our earnings to factor in stronger wins (state tenders) over the next two years.”
“However, we anticipate that there would likely be a lag effect before more meaningful earnings contribution, as land acquisition and actual mobilisation of machinery could be slower than expected for a project like the ECRL.”
Given the higher work progress on the underground and elevated works of the Klang Valley MRT Line 2, Gamuda’s earnings rose 11.9 percent to RM170.9 million, while revenue surged by 79.6 percent to RM839.4 million during its third financial quarter ended 30 April 2017.
So far this year, its earnings increased by 5.3 percent to RM499.34 million on an annual basis, while revenue soared by 45.8 percent to RM2.2 billion.
Image sourced from The Star