Gamuda primed for a recovery in FY21

by FARA AISYAH / graphic by MZUKRI

GAMUDA Bhd is expected to bounce back in the first half of next year after posting its first net loss in two years in the fourth quarter following the resumption of key infrastructure projects.

Maybank Investment Bank Bhd analyst Wong Chew Hann raised his ratings on Gamuda to ‘Buy’ from ‘Hold’ with a revised target price of RM3.80, citing the potential revival of major rail projects such as the Klang Valley Mass Rapid Transit Line 3 (KVMRT3) and the Kuala Lumpur-Singapore High-speed Rail.

He said the revised forecasts for Gamuda imply a 17% core net profit growth for the financial year ending July 31, 2021 (FY21), driven by its engineering and construction segment as works on the KVMRT2 progress towards completion in 2022.

The research house revised Gamuda’s net profit estimates by 2% for FY21 and 16% for FY22.

Wong said Gamuda’s RM6.9 billion outstanding orderbook as of end-FY20 would last at least two years, while the pipeline is promising with KVMRT3 closer to a government decision.

The Penang Transport Master Plan’s South Reclamation Island job is also scheduled to start by mid-2021.

The company has two joint ventures that have been shortlisted for two major infrastructure projects in Australia, namely Sydney Metro West project and M6 Highway project.

Wong said Gamuda’s property earnings would also be supported by RM3 billion of unbilled sales as of end-FY20. The internal pre-sales target for FY21 is RM3.5 billion, of which a third would be domestic and two-thirds from overseas.

The group’s balance sheet remains strong, with net gearing down to 0.31 time as of end-FY20 against 0.41 time at end-FY19 on the back of a lower net debt of RM2.67 billion as of end-FY20 compared to RM3.29 billion at end-FY19, he said.

To recap, Gamuda slipped into the red with a net loss of RM17.34 million in the fourth quarter ended July 31, 2020 (4QFY20) against RM179.02 million net profit a year ago, due to a one-off asset impairment after of one of its industrialised building system factories was shut down.

Its quarterly revenue declined 38% year-on-year (YoY) to RM926.52 million from RM1.5 billion in 4QFY19. Excluding the one-off non-cash impairment, the group posted a core net profit of RM131 million in the three months.

On a full-year basis, Gamuda’s net profit fell 47% YoY to RM371.68 million from RM706.11 million, while turnover fell 20% YoY to RM3.66 billion from RM4.57 billion.