Gamuda’s TP upgraded on potential contract awards

By MARK RAO / Pic By BLOOMBERG

THE recent weakening of Gamuda Bhd’s share price offers investors a good opportunity to buy into a construction counter poised to benefit from key infrastructure contracts that would be rolled out by the government soon.

According to a research report by Maybank Investment Bank Bhd (MIBB), Gamuda’s first-quarter (1Q) results were within all expectations, as the group’s improved revenue and earnings were supported by the progress of the Klang Valley Mass Rapid Transit Line 2 (KVMRT2) project as well as its stronger property sales.

“Gamuda remains a potential beneficiary of contracts from the East Coast Rail Link, KVMRT3, Kuala Lumpur- Singapore high-speed rail and Pan Borneo Sabah Highway.

“[The company’s] recent share price weakness presents a buying opportunity,” the report stated.

As such, the research house has maintained a ‘Buy’ recommendation for the stock at a revalued net asset value (RNAV)-based target price (TP) of RM5.60, representing a 15.9% premium to the company’s last traded price of RM4.83 on Monday.

Meanwhile, MIBB lowered its RNAV-based TP for Eco- World Development Group Bhd (ECW) by 17 sen to RM1.71 at a ‘Buy’ recommendation, based on a lower 0.6 times price-to-RNAV estimate.

The lowered TP follows MIBB adjusting its earnings forecast for the property developer 33 points down to 26%, due to ECW’s recent 4Q results, the challenging property market, lack of new projects and lowered target sales of RM3.5 billion.

The RM1.71 TP is at a 15.5% premium to ECW’s last traded price of RM1.48 on Monday.

Meanwhile, EcoWorld International Bhd’s (EWI) TP was maintained at RM1.10, 6.8% higher than its last traded price of RM1.03 on Monday, after the company’s achieved sales were above expectations despite turning in losses over its financial year 2017 (FY17).

“2018 will be the tipping point with the handover of three towers at London City Island and Embassy Garden from April 2018.

“We are positive on the joint venture (JV) with Willmott Dixon where it will enhance EWI’s foothold in the UK, diversify its product range and for its fair pricing,” MIBB’s report read.

It further estimated a nine sen higher RNAV enhancement from the six projects under the JV.

The research firm also upgraded its TP for Bison Consolidated Bhd to RM3 based on its rolling forward valuations, while maintaining a ‘Hold’ call on the counter which is to assume the name MyNews Holdings Bhd on Dec 20, 2017.

“Store openings are largely on track, having opened 62 stores during the financial year ended Oct 31, 2017 (FY17), versus its internal target of 70.

“We tweak FY18 and FY19 earnings forecast higher by 4% and 1% respectively, assuming lower taxes on tax incentives enjoyed by its ‘MSC’ status subsidiary,” MIBB’s report added.