THERE are at least three favourable developments in the pipeline that should brighten up Gamuda Bhd’s prospects in 2022.
First, there is the possible reactivation of the RM20 bil-RM30 Bil Mass Rapid Transit Line 3 (MRT3/Circle Line) project given MRT Corp’s target of a project re-launch and civil works tender in 1H CY2022F, according to CGS-CIMB Research.
“Secondly, there are potential awards of one ongoing bid in Australia (RM5 bil-RM6 bil) and the tender process for one new bypass construction package in New South Wales for which the Gamuda-Ferrovial JV has emerged as among the three shortlisted bidders,” analyst Sharizan Rosely pointed out in a company update.
“Thirdly, there is the likely revival of the RM5 bil Penang South Islands (PSI) land reclamation contract and fourthly, the Government’s review of the divestment of the group’s domestic highway assets via a highway trust proposal.”
Even with a potential change in the structure of the civil works component of the RM20 bil-RM30 bil MRT 3/Circle Line project, CGS-CIMB Research expects Gamuda to remain among the main contenders in the civil works tender rounds.
“We are positive that the underground scope will likely be tendered as one single package as this bodes well for the MMC Corp Bhd-Gamuda JV given its strong track record and credentials in the tunnelling scopes of MRT 1 and 2,” noted the research house.
“Gamuda’s end-October 2021 net gearing of 0.17 times translates into additional borrowing capacity of over RM4 bil based on the group’s self-imposed net gearing limit of 0.7 times. This allows ample room for Gamuda to participate in the private sector funding component of the MRT 3 project.”
As for the PSI land reclamation project which stalled due to a court ruling in favour of a fishing community’s appeal to revoke the environmental impact assessment (EIA) approval, CGS-CIMB Research gathered that progress is back on track with re-submission of the project’s EIA application by March and likely approval by mid-2022 (work slated to start by 2H CY2022).
Viewing that Gamuda’s share price is at attractive levels, CGS-CIMB Research has reiterated its “add” call on the integrated contractor-cum-property developer with an unchanged target price of RM3.88.
“We view setbacks arising from the PSI project, uncertainties over the MRT3 and disruptions from COVID-19 as largely priced into its share price decline of 25% in 2021 and 4% year-to-date (YTD).
“Key potential catalysts (for the company) are contract wins. The downside risks are delays in the resumption of mega contracts and unsuccessful tenders in Australia.”
At 12.16pm, Gamuda was down 4 sen or 1.41% to RM2.80 with 206,600 shares traded, thus valuing the company at RM7.04 bil. – Feb 4, 2022
