Gamuda 1Q results within expectations

The company’s earnings rose 39% YoY to RM152m on stronger contribution from MRT2 project 

By S BIRRUNTHA / Pic TMR Graphic

GAMUDA Bhd’s financial performance for the first quarter ended Oct 31, 2021 (1Q22) was within market expectations according to RHB Investment Bank Bhd (RHB Research). 

Its analyst Lester Siew stated that the construction and engineering group reported decent 1Q22 results, making up 26% of both his and consensus’ full-year forecasts respectively. 

He added that despite a slight drop in Gamuda’s revenue, its core earnings rose 39% year-on-year (YoY) to RM152 million on stronger contribution from the Mass Rapid Transit Line 2 (MRT2) project, alongside improved operating margins. 

RHB Research has maintained its earnings estimates, and target price of RM3.55 on Gamuda based on its 1Q performance. 

The investment bank upgraded Gamuda to ‘Trading Buy’ from ‘Neutral’ previously, as it sees trading opportunities in the stock following its recent share price dip. 

“We keep our sum of parts-derived TP, which is based on 11x price-earnings multiple to construction earnings, and after ascribing a 2% environmental, social and governance premium onto our computed fair value. 

“Our ‘Trading Buy’ upgrade is on the back of its recent share price dip, as we see trading opportunities ahead of immediate term developments surrounding its orderbook replenishment prospects,” Siew wrote in a research note on Gamuda yesterday. 

Looking ahead, Siew noted that the potential immediate term catalyst could come from a positive outcome on its two Australian project tenders which are due within the next two months. 

Gamuda’s 1Q22 net profit climbed 38.15% YoY to RM152.37 million despite revenue falling by 2.2% YoY to RM747.11 million. 

The group attributed the strong quarter earnings from all its divisions as work on all fronts continued to pick up pace. Earnings per share for the period 

was 6.06 sen, leading the company to declare an interim dividend of six sen per share for the financial year ending July 31, 2022, with the entitlement date yet to be set. 

Gamuda stated that its property sales improved 25% YoY with RM838 million worth of properties sold in 1Q22 versus RM673 million sold in the same period last year. 

“Overseas sales continued to spearhead the group’s property divisions, contributing two-thirds of overall sales. On the local front, Gamuda Gardens and Gamuda Cove sales have doubled in volume,” the company noted in a statement accompanying its financial results. 

On its prospects ahead, Gamuda stated the ongoing risks to the country’s economic and fiscal outlook posed by the progression of the Covid-19 pandemic and uncertainties surrounding the Delta and now Omicron variants have dampened economic activity. 

It added that public spending and stimulus for infrastructure development were constrained by rising government fiscal burden but may see some momentum with the government’s bid to revive the public-private partnerships approach. 

As such, the group is anticipating this year’s performance will be driven by overseas and local property sales and the continued progress of MRT Putrajaya Line (formerly called MRT Line 2). 

Moving forward, the resilience of the group is underpinned by its construction orderbook of RM3.8 billion and unbilled property sales totalling RM4.9 billion. 

The group has a healthy balance sheet with low gearing of 0.2 times and a strong cash position.