AMBANK Research today has maintained its underweight rating on Gamuda Bhd but reduced net profit forecasts for FY20-22F by 5% to 6% each and its fair value down by 6% to RM2.85 from RM3.02.
The reduction in the sum-of-the-parts-derived target price, AmBank said, is due to Gamuda’s 9MFY20 results missing expectations, coming in at only 73% and 63% of its full-year forecast.
“We believe the main culprit was the six-week impact from the movement control order (MCO) and conditional MCO on Gamuda’s construction activities, property sales and toll collections.
“The impact has turned out to be much more damaging than expected (and shall continue to wreak havoc until at least in 4Q (May to July), as indicated in its current construction activities being at only 70%-75% of those of the pre-MCO levels, even though the MCO has now been substantially relaxed),” Joshua Ng wrote in the company report.
According to the report, Gamuda’s 9MFY20 core net profit contracted 25% year-on-year with weaker earnings across the board, such as construction (the downsized MRT2 contract and reduced construction activities during the MCO in 3Q), property (strong sales and firm margins in Vietnam, offset by the MCO impact in Malaysia in 3Q) and concessions (absence of contribution from SPLASH post-disposal and an 80%-90% plunge in toll road traffic during the MCO).
Gamuda did not declare a second 6 sen dividend during FY20F in order to conserve cash, causing the research house to cut FY20F and FY21F dividend forecasts to 6 sen and 9 sen respectively, from 12 sen previously.
Gamuda had recorded only RM1.2 bil property sales in 9MFY20, with overseas projects (largely in Vietnam) contributing about 70% of the total, while the balance 30% came from its local township projects comprising largely Gamuda Gardens (near Rawang), Gamuda Cove (near Nilai) and Twentyfive.7 (near Kota Kamuning), noted the research house.
Hence, AmBank has cut Gamuda’s FY20F property sales target by half to RM2 bil from RM4 bil previously. – June 25, 2020
