AMINVESTMENT Research has maintained its underweight call on Gamuda Bhd after the construction group posted flat quarterly earnings.
Gamuda registered a net profit of RM185.59 mil for the first quarter ended Oct 31 compared to RM186.44 mil for the same quarter last year.
“Gamuda recorded only RM0.5 bil property sales in 1QFY20, with overseas projects (largely in Vietnam) contributing about 60% of the total and the balance coming from its local township projects comprising largely Gamuda Gardens (near Rawang), Gamuda Cove (near Nilai) and Twentyfive.7 (near Kota Kamuning). It is reviewing its FY20F property sales target of RM4 bil for a possible downward revision, largely due to the soft local property market,” the research house said in a Dec 16 note.
But AmInvestment noted that Gamuda has a high “concentration risk” in the Penang Transport Master Plan (PTMP) project.
“Zooming in on Gamuda, we sense high ‘concentration risk’ in the PTMP project in the event the project fails to get off the ground timely (2H20 as guided) or Gamuda being given a reduced role in the project (as the project delivery partner (PDP) model is no longer favoured by the federal government as manifested in the cancellation of the PDP model in the construction of the LRT3, MRT2 and Pan Borneo Highway Sarawak),” the research house said.
AmInvestment also noted that it may have to cough up a hefty amount of capital for its foray into the Australian construction market.
Gamuda managing director Datuk Lin Yun Ling said in a Dec 5 press conference that the group had decided to venture into Australia as there are “not enough big projects in Malaysia” as well as stiff competition from China contractors.
