MIDF Research has maintained its neutral recommendation on Gamuda Bhd with an unchanged target price (TP) of RM3.70, pegging its FY21 EPS to price-earnings (PE) of 14x.
Gamuda and MMC Corp Bhd (its 50% joint-venture partner) have inked two agreements which were executed with Mass Rapid Transit Corp Bhd. This process managed to yield savings of RM8.82 bil from RM39.35 bil to RM30.53 bil but the execution of both agreements is expected to have no material effects on FY20 earnings.
Based on a Bursa announcement dated Jan 17, Gamuda and MMC have inked two agreements, namely a supplemental agreement to the PDP agreement between MMC Gamuda KVMRT (PDP SSP) Sdn Bhd, and a novation agreement between PDP SSP and MMC Gamuda KVMRT (T) Sdn Bhd.
The execution of the agreements is to formalise the role of MMC-Gamuda to deliver and be responsible for the design, execution and completion of the entire Sungai Buloh-Serdang-Putrajaya (SSP) Line (for both above ground and underground) on a turnkey basis.
It is worth noting that this process managed to yield savings of RM8.82 bil, from RM39.35 bil to RM30.53 bil (22.4% from the original cost).
The factors that attribute to the cost saving were conversion to turnkey model to save on PDP fee, rationalisation in the allocation of reimbursables, contingencies and provisional sums, the postponement of Bandar Malaysia stations, and scope rationalisation for electrical and mechanical system works. However, the savings will not be immediate since it is spread over 20 years.
The current work progress for the Mass Rapid Transit SSP Line (MRT2) is now 70% complete. Major works are expected to be completed in 2022, and by 2023, MRT2 is expected to become fully operational.
The first phase (Kwasa Damansara station to Kampung Batu station) will begin operating in July FY21. Meanwhile the second phase (Kampung Batu station to Putrajaya Sentral station) will become operational by January FY23. Moving forward, the MRT2 project is anticipated to be completed on time and under budget.
