KDN: PP 10744/05/2013 29 June 2012 3QFY12 Results Review Gamuda Bhd Stellar quarter, construction margin peaked Maintain BUY Revised Target Price (TP): RM4.27 (from RM4.40 previously) INVESTMENT HIGHLIGHTS Slightly above expectation. Gamuda Berhad (Gamuda) s net profit of RM406.8m in 3QFY12 came slightly above ours and consensus expectations, accounting for 79% and 78% of ours and consensus forecasts. The variance was mainly due to the higher-than-expected margin of its construction segment (3QFY12: 15%). An interim dividend of 6 sen was declared. Stellar quarter. Cumulative 3QFY12 net profit jumped 36%yoy to RM406.8m driven by higher contributions from the construction and property divisions. Management updated that construction margin peaked at 15% in 3QFY12 as the Ipoh-Padang Besar Double Tracking project has reached its tail end. Meanwhile, the property division s cumulative pre-tax profit surged by 89%yoy to RM210.2m in 3QFY12 on the back of strong sales at home coupled with a second booking of Celadon City s land sale to Aeon Japan worth RM10m RM12m. Order book at RM5.5b. Gamuda s outstanding orderbook stood at RM5.5b of which 76% comprise the tunnelling portions of the Sungai Buloh - Kajang Line (MRT1). The outstanding orderbook should sustain Gamuda s earnings for the next 4 5 years. Unbilled sales of RM1.3b. YTD, Gamuda s unbilled sales stood at RM1.3b. Cumulative new property sales for 3QFY12 also stood at RM1.3b of which RM920m came from domestic and the remaining RM370m from the Vietnam operations. To be conservative, management mentioned that the targeted annual property sales of RM2b for FY12 may fall short by 20% to RM1.6b due to slower sales in Vietnam operation. Bought 4.86 acres land in Kelana Jaya. Management also updated that it has entered into a sale and purchase agreement 2 weeks ago to acquire 4.86 acres piece of freehold commercial land in Kelana Jaya for a cash consideration of RM95m. It intends to develop Small office/home office (SoHo) units with a gross development value (GDV) of RM600m. We view this positively as Kelana Jaya is strategically located: i) 250,000 population catchment, ii) next to Lebuhraya Damansara Puchong (LDP) expressway, iii) public transport of LRT and iv) the new retail Paradigm Mall recently launched in May 2012. RETURN STATS Price (28 th June 2012) RM3.46 Target Price RM4.27 Expected Share Price Return +23.4% Expected Dividend Yield +3.5% Expected Total Return +26.9% STOCK INFO KLCI 1,594.24 Bursa / Bloomberg 4235/GAM MK Board / Sector Main/Cons Syariah Compliant Yes Issued shares (mil) 2077.4 Par Value (RM) 1.00 Market cap. (RM m) 7187.75 Price over NA 1.87 52-wk price Range RM2.63-RM3.97 Beta (against KLCI) 1.43 3-mth Avg Daily Vol( 000) 4.40m 3-mth Avg Daily Value( 000) 15.35m Major Shareholders Skim ASB 8.31% KWAP 7.72% KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT DISCLOSURES
2 INVESTMENT STATISTICS FYE Jul FY10 FY11 FY12F FY13F Revenue (RM m) 2,455.1 2,673.2 2,950.1 3,458.2 EBIT (RM m) 259.9 380.9 487.8 541.4 Pre-tax Profit (RM m) 412.3 544.5 670.3 703.4 Net Profit (RM m) 322.9 425.4 510.84 536.1 EPS (sen) 15.7 19.8 25.1 26.4 EPS growth (%) 0.63 0.26 0.27 0.05 PER(x) 22.08 17.47 13.78 13.13 Net Dividend (sen) 9.02 11.30 12.00 12.00 Net Dividend Yield (%) 2.61 3.27 3.47 3.47 Sources: Company, MIDF Research Eyeing at least RM10b worth of rail-related projects As previously highlighted, Gamuda is eyeing at least RM10b orderbook replenishment going forward which consists of railway-related projects namely the MRT2 and MRT3 tunnelling portions and the Southern Gemas-JB Electric Double Tracking Project (EDTP). It is expected that tenders for the MRT2 and MRT3 tunnelling portions will be called next year and the award should materialize at the end of 2013. Gamuda is also currently awaiting the tender result for the RM8b Southern EDTP Gemas JB railway project (in partnership with China Railway Construction Corporation). The award of the project is expected after the 13 th General Election. We believe that Gamuda would have a higher chance to win those projects given its local contractor status as well as strong track record in undertaking rail-related projects. However, we have not imputed either EDTP Gemas JB or MRT2 and MRT3 underground project in our FY13 assumed orderbook. We have only imputed in RM2.5b of new projects in our FY13 numbers. MRT1 updates: Management updated that MRT1 project has been progressing well with MRT Corp so far having awarded 31 out of 91 packages worth about RM13.8b or 69% of RM20b total estimated project value. There are more tenders in the pipeline which would see another 31 packages yet to be called. Very soon, V2 (K. Damansara - Dataran Sunway) and V3 (Dataran Sunway - Section 16) of viaduct packages will be awarded which we believe it is worth at around RM900m - RM1.0b. Meanwhile, it is expected that V8 and stations packages will be awarded in August 2012. Forecasts. Although we have lowered our FY12 revenue forecast by -7% due to lower-than-expected construction turnover in 3QFY12, we have jacked up Gamuda s PBT margin by +2%pts to 23% after adjusting for better-than expected margins for its construction division in 3QFY12. This results in very minimal change in our FY12F earnings. We have also tweaked our FY13 net profit forecast by -4% as we are not expecting Gamuda to get higher construction margin as was the case in FY12. The remaining Ipoh- Padang Besar works are only system and M&E jobs which MMC:Gamuda will sub-contract out. Hence the margin will be rather low. BUY Gamuda with a TP of RM4.27. Post earnings revision, we reaffirm our BUY call with revised year-end target price of RM4.27, pegging 17x PER to calendarised 2012 EPS. Gamuda is one of our sector s top picks as we believe Gamuda is a direct proxy to robust construction outlook this year or even years ahead given its status as one of the leading contractors in the country. We expect Gamuda s earnings to remain intact in the foreseeable future on the back of its healthy orderbook of RM5.5b, higher unbilled sales of RM1.3b, higher margins as well as its higher chance of securing new contracts.
3 3QFY12 RESULTS SUMMARY Quarterly Results Cumulative Comments FYE Jul(RM m) 3QFY12 YoY QoQ 3QFY12 YoY Revenue 705.86 14% -8% 705.86 14% EBIT 159.32 26% 6% 159.32 26% Operating margin 22.6% 2% 3% 22.6% 2% Pre-tax profit 196.03 24% 4% 196.03 24% As above Tax (52.11) 33% 27% (52.11) 33% Net Profit 138.01 18% 1% 138.01 18% As above EPS (sen) 6.38 13% 0% 6.38 13% EBIT Segmental Breakdown Engineering & Construction 61.71 5% -5% 172.59 40% Strong property sales from domestic and Vietnam Margin of property and construction segment improved Higher margin from EDTP Ipoh - Padang Besar (+15% in 3QFY12) Property deveopment 82.27 64% 13% 212.43 84% Strong property sales and margin Water & Expressway Concessions 15.33-15% 27% 47.47-9% CONSTRUCTION ORDERBOOK Completion Status Major Projects Major Ongoing Balance GDV (RM b) % now Completion Date Double Tracking 1.2 81 2014 Recently Secured MRT1 Tunnelling 4.2 0 2017 Completing soon Yenso Park STP 0.1 98 2012 North Doha International Airport - 100 Total 5.5 Source: Gamuda, MIDF Research
4 PROPERTY LANDBANK AND GDV PROJECTS Area Unsold (acres) Remaining GDV (RM m) PROJECTED SALES FY10A FY11A FY12F FY13F MALAYSIA Kota Kemuning 25 150 100 100 80 70 Valencia 10 80 110 100 50 30 Bandar Botanic 150 1200 330 670 650 450 Horizon Hills 760 3700 140 270 320 370 Jade Hills 230 1300 140 180 220 250 Madge Mansion 2 300 0 0 30 80 Jalan Robertson 3 600 0 0 0 100 TOTAL (MALAYSIA) 1180 7330 820 1320 1350 1350 VIETNAM Gamuda City (Hanoi) 450 9000 0 0 500 750 Celadon City (HCMC) 200 5000 0 0 250 250 TOTAL (VIETNAM) 650 14000 0 0 650 1000 TOTAL 1830 21330 820 1320 2000 2350 EBIT MARGIN TREND 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 EBIT Construction EBIT Property EBIT
5 Sources: Bloomberg, MIDF Research SUNGAI BULOH -KAJANG MRT1 LINE ALIGNMENT DAILY PRICE CHART Zulkifli Hamzah Iqbal Zainal mohd.iqbal@midf.com.my 03-2772 1668
MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X). (Bank Pelaburan) (A Participating Organisation of Bursa Malaysia Securities Berhad) DISCLOSURES AND DISCLAIMER This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for distribution only under such circumstances as may be permitted by applicable law. Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on information obtained or derived from sources that we believe are reliable. MIDF AMANAH INVESTMENT BANK BERHAD makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of the information contained therein and it should not be relied upon as such. This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. All opinions and estimates are subject to change without notice. The research analysts will initiate, update and cease coverage solely at the discretion of MIDF AMANAH INVESTMENT BANK BERHAD. The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may have interest in any of the securities mentioned and may benefit from the information herein. Members of the MIDF Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein This document may not be reproduced, distributed or published in any form or for any purpose. MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS STOCK RECOMMENDATIONS BUY TRADING BUY NEUTRAL SELL Total return is expected to be >15% over the next 12 months. Stock price is expected to rise by>15% within 3-months after a Trading Buy rating has been assigned due to positive newsflow. Total return is expected to be between -15% and +15% over the next 12 months. Total return is expected to be <15% over the next 12 months. TRADING SELL Stock price is expected to fall by>15% within 3-months after a Trading Sell rating has been assigned due to negative newsflow. SECTOR RECOMMENDATIONS POSITIVE NEUTRAL NEGATIVE The sector is expected to outperform the overall market over the next 12 months. The sector is to perform in line with the overall market over the next 12 months. The sector is expected to underperform the overall market over the next 12 months. 6