Buy Gamuda shares, says RHB

KUALA LUMPUR: RHB Research maintains BUY call on Gamuda, sees fair value unchanged at RM5.45 as the Klang Valley MRT Line Two is good as as approved.

RHB noted that Gamuda is the best proxy to public infrastructure spending in Malaysia given its dominant role in Line One of the Klang Valley MRT project, and most likely Lines Two & Three as well.

"Gamuda has secured the best parts of Line One with a 6 per cent fee and a contractor for the high-margin tunneling jobs; and is likely to take the lead in terms of reacting to new sector price catalysts, given its large market capitalisation.

This follows first half 2014 results that met expectations, as well as the fact that Gamuda is now working on the basis that the Cabinet has approved the RM25 billion Klang Valley MRT Line Two.

RHB said Gamuda is the best proxy to the construction sector, which is riding an extended upcycle backed by the RM73 billion Klang Valley MRT project.

"The first half 2014 net profit was within expectations at 50 per cent/48 per cent of its full-year forecast/market consensus respectively.

"Gamuda and project owner MRT Co are now working on a basis that the RM25 billion Line Two of the Klang Valley MRT project has been approved by the Cabinet, pending formal announcement by the Government.

"Gamuda is making good progress on Line One of the Klang Valley MRT project. As at end-second quarter 2014, financial completion of the elevated portion stood at 24 per cent, with the tunneling portion 34 per cent completed."

RHB added that despite headwinds in the property sector, Gamuda still expects another record year in financial year 2014.

"Sales of RM1.9 billion in projected versus the RM1.75 billion it achieved in financial year 2013. In first half 2014, it already recorded property sales of RM980 million."