|The Edge FD Top Pick 2017|
Gamuda Bhd has significant upside due to its strong outstanding order book of RM9 billion, supported by the MMC-Gamuda joint venture which secured the RM15.5 billion mass rapid transit (MRT) Line 2 underground works package in March 2016, according to TA Securities.
“We expect close to RM500 million of project development partner (PDP) fee to flow directly to profit before tax throughout the implementation of [the] MRT Line 2,” the research house said in a report.
Other catalysts include Gamuda’s works package for Pan Borneo Highway worth RM1.57 billion and the appointment of SRS Consortium, in which Gamuda has a 60% stake, as the PDP for the Penang Transport Master Plan (PTMP).
TA Securities has estimated that the alternative proposal adopted by the Penang state government has a projected value of RM40 billion, with works targeted to commence in 2018.
The potential sale of Gamuda’s 40% stake in the Syarikat Pengeluar Air Sungai Selangor water supply concession should provide the funding for its PTMP project, said AffinHwang Capital.
Shares in Gamuda have a 12-month target price of RM5.46 according to consensus estimates. Of the 23 analysts covering the company, 18 have rated a “buy” call on the stock, while three have a “hold” call.
Bloomberg data projects a 7.05% growth in earnings per share (EPS) for the construction player for its financial year ending July 31, 2017 and a further 13.17% EPS growth for the following year. — By Samantha Ho