KUALA LUMPUR: Affin Hwang Capital Research has reiterated its buy call on Gamuda Bhd with revalued net asset valuation-based target price (TP) of RM4.30.
The buy call came on the heels of Gamuda and its Taiwanese 70:30 joint venture partner Dong-Pi Construction Co Ltd’s success in clinching a RM932.5 mil contract to construct a seawall in Taiwan from Port of Keelung, Taiwan International Ports Corporation Ltd.
“This is the second project that Gamuda has secured in Taiwan over the past year. We believe the project will allow Gamuda to gain expertise in reclamation and shore protection works that are required for the Penang South Reclamation component of its Penang Transport Master Plan project,” it said.
In March last year, Gamuda and Dong-Pi Construction won a RM521.7 mil marine bridge contract in Taiwan from the island’s state-owned energy company CPC Corporation.
Affin Hwang said based on its 70% stake in the project, Gamuda’s share of works is RM653 mil, increasing its current order book by 7% to about RM9.85 bil.
“We believe the earnings per share impact is not material given the long-term nature of the contract (+0.2%-0.6% in the financial year ending 2020-2022 estimate), assuming a pre-tax margin of 5% for the project.
“Nevertheless, we are positive on Gamuda’s prospects to grow its order book going forward,” it said.
AllianceDBS Research also has a buy call on Gamuda with TP maintained at RM4.65 following the contract win.
The research note, however, pointed out that other near-term catalysts to watch out for is the government’s decision on Gamuda’s toll concessions which is expected next week and the possible signing of the Project Delivery Partner agreement for the Penang Transport Master Plan project this month.
“Gamuda represents the best proxy to the revival in government mega projects which are already happening, with the added bonus coming from its overseas wins,” it said.
Meanwhile, Public Investment Bank Research has affirmed its outperform rating on Gamuda with a TP of RM4.26.
“We are encouraged by this development as it proves Gamuda’s strong ability in continuing to replenish its order book in the overseas market. Inclusive of this contract, the group has successfully added RM1 bil worth of projects to push its unbilled order book in hand to about RM9 bil,” it said.
At 10.30am, Gamuda’s share added three sen, or 0.77% to RM3.93, with 594,800 shares changing hands. – Jan 3, 2020, Bernama
