Gamuda

[winston]

not vested

SPLASH Acquisition – A Positive Deal For SPLASH Shareholders

Air Selangor has offered to acquire SPLASH for RM2.55b in cash, much higher than the previous offer of RM250m.

We expect SPLASH’s shareholders, including Gamuda which controls 40% of SPLASH, to accept the offer by 10 August.

While Gamuda’s share price uptrend has discounted Gamuda’s inclination to substantially
distribute its 43sen/share cash proceeds, the jumpstart of PTMP will further lift valuations.

Maintain BUY with a revised target price of RM4.36.

Source: UOBKH

https://research.uobkayhian.com/content ... 8bbb215163

[winston]

not vested

What’s New

Gamuda likely to accept offer for Splash at 0.77x BV
Special dividends possible but PTMP’s capex needs to be balanced
Raising TP to RM5.03 for Splash’s offer price, and some modest new wins
Maintain BUY rating

Potential catalyst: The most important catalyst for Gamuda and the sector as a whole is the revival of key infrastructure projects.

Gamuda’s strong reputation based on work for MRT Line 1 and 2, as well as its appointment as Project Delivery Partner (PDP) for the Penang Transport Master Plan (PTMP) will put it in the
driver’s seat when there is more certainty on government related projects.

In our view, MRT 3 will eventually be revived and Gamuda will be a key beneficiary. The revised offer for Splash at RM2.72bn nominal value also removes a key overhang for the stock.

Valuation:

Our new SOP-derived TP of RM5.03 assumes RM3bn construction new wins and discounts for its highway tolls but water concessionaire Syarikat Pengeluar Air Selangor Sdn Bhd (Splash) at the offer price.

At the current price, we think the market is ignoring the factor of potentially less foreign
participation in the sector. Gamuda could be a key beneficiary of this, as well as the potential revival of PTMP.

Source: DBS

https://researchwise.dbsvresearch.com/R ... VyaWRAQA==

[winston]

Gamuda, KPS shares down on buyout offer for SPLASH's water treatment assets

by Billy Toh

The offer price is at a 28% discount to SPLASH's net book value of RM3.54 billion as at June 30 this year.

The acquisition will see Pengurusan Air Selangor make an upfront payment of RM1.9 billion upon signing the definitive agreement with the remaining RM650 million being paid in instalments over a period of nine years.

Gamuda controls a 40% stake in SPLASH with KPS owning 30% while the remaining 30% stake is owned by businessman Tan Sri Wan Azmi Wan Hamzah through private vehicle Sweet Water SPV Sdn Bhd.

The divestment of the 40% stake in SPLASH will see Gamuda earn an instant cash payment of RM760 million while KPS will rake in RM570 million.

Source: Theedgemarkets.com

http://www.theedgemarkets.com/article/g ... ent-assets

[winston]

not vested

Light at the end of the ‘pearl’?

Maintain HOLD

Progress on the PTMP looks promising at this juncture and the finalization of the PDP agreement between SRS Consortium and the Penang State government, expected in 2HCY18, could be a re-rating catalyst for Gamuda.

However, earnings overhang on the quantum of cost down from the KVMRT 2 remains.

Our FY19E/FY20E earnings are cut by 11%/10% after excluding SPLASH’s contribution.

Our RNAV-based TP is lowered to MYR3.60 (-10%).

Source: Kim Eng

https://factsetpdf.maybank-ke.com/PDF/1 ... 26af8d.pdf

[winston]

not vested

Promising FY18, But FY19 Likely To Be A Transition Year

Gamuda expects promising earnings for FY18, underpinned by strong billings from its mega projects (MRT2) and with it likely to have surpassed its FY18 property sales target.

The company is optimistic of the PTMP project commencing construction in 2020.

However, FY19 earnings should soften following the water assets disposal with potential downside from the likely significant contract value reduction for the MRT2 project.

Maintain BUY. Target price: RM4.29.

Source: UOBKH

https://research.uobkayhian.com/content ... e492cd5c21

[winston]

not vested

Gamuda core net profit hits new high

KUALA LUMPUR: Gamuda Bhd took a one-time hit in the fourth quarter arising from the disposal of its water assets to the Selangor state government, but a jump in property sales overseas boosted its annual core profit to a new high.

The company made a net loss of RM101mil in the three-month ended July 31, the company said in a filing with Bursa Malaysia on Friday.

Excluding the one-off loss of RM300mil on disposal of Splash and RM4mil on investment in Gamuda Water, core net profit in the last quarter was RM203mil.

The group’s property division, Gamuda Land was a strong performer in the last quarter with RM1bil in property sales.

This lifted its full year sales value to a new high of to RM3.6bil.

The group said property sales in FY18 grew by 50% compared with last year’s sales of RM2.4bil on the back of stronger sales from its two projects in Vietnam, Celadon City in Ho Chi Minh City and Gamuda City in Hanoi, and GEM Residences in Singapore.

Overseas sales contributed 70% of overall property sales.

The property division reported revenue of RM2.6bil and core net profit of RM206mil in FY18.

Meanwhile, the group’s construction division’s revenue rose 22% to a record-high RM4.1bil compared with RM3.3bil in the preceding year. Core net profit for the year grew by 32% to a record-high RM297mil.

“Excluding this year’s one-off losses and last year’s one-off impairment loss on investment in Smart of RM98mil, Gamuda group achieved a record-high core net profit of RM818mil this year, an increase of 17% compared with RM701mil last year,” it said.

In a separate development, Gamuda has entered into a conditional share purchase agreement with Pengurusan Air Selangor Sdn Bhd for the proposed disposal of its entire equity interest in Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) for a total cash consideration of RM2.55bil.

According to a Bursa Malaysia filing, Gamuda said the disposal consideration shall be paid by Air Selangor to Splash Holdings via an upfront sum of RM1.9bil and the remaining sum of RM650mil is to be paid in nine annual instalments.

The upfront sum shall be paid on the completion date, which will be no later than 14 calendar days following the date on which the last of the conditions precedent is satisfied or waived.

The disposal consideration, which is justified as it is within the valuation range as appraised by Moore Stephens, will enable Gamuda to monetise its investment in Splash, via its 40% stake in Splash Holdings.

Source: The Star

https://www.thestar.com.my/business/bus ... PAeL8ot.99

[winston]

Construction stocks hit, Gamuda falls the most

by Joseph Chin

AmInvestment Research had cut the earning outlook and reduced the fair value by 19% to RM2.71 for Gamuda and downgraded its call to underweight from hold.

The earnings downgrade was to reflect the government’s termination of MMC-Gamuda as the tunnelling contractor for the MRT2 project.

Source: The Star

https://www.thestar.com.my/business/bus ... 3lKcH07.99

[winston]

not vested

MMC-Gamuda holds out for solution

by Daniel Khoo

Under review: MMC-Gamuda was given the mandate to see the completion of the MRT2 as the project delivery partner in February 2014. However after the change in government in May this year, the project came under review.

PETALING JAYA: The MMC-Gamuda joint venture (JV) is holding out for an amicable settlement with the government in regard to the mass rapid transit phase two (MRT2) project.

It said in a statement that the underground portion of the project was 40% completed and it had already offered a RM2.3bil reduction in the priceof the underground works that was awarded to the JV at a cost of RM15.47bil in 2016.

“The balance of the uncompleted underground work is valued at RM9.6bil. MMC-Gamuda has offered a reduction of RM2.3bil, which represents 24% of this value.

“Even though the Finance Ministry (MoF) has made known that the offered reduction of RM2.3bil is still not adequate, to date, it has not been conveyed to MMC-Gamuda an acceptable target figure that the MoF has in mind.

If the target figure is made known together with the components of the savings as individual items, both parties would be placed in a better position to re-examine these components from where savings could be derived and narrow the differences,” MMC-Gamuda said in the statement.

After the change in government in May this year, the project came under review.

However, the MoF disclosed on Sunday that the cost had almost doubled to RM56.93bil due to various factors such as changes in the rail alignment and the depreciation of the ringgit to the US dollar.

The ministry also said that the contract for the underground works in MRT2 awarded to MMC-Gamuda had been terminated.

However, it (the ministry) has accepted the JV’s offer to undertake the above-ground works for RM17.42bil and as a turnkey contractor instead.

The MoF said it had been guided by a consulting firm in arriving at a decision to terminate the underground contract and call for an international tender to reduce the cost.

MMC-Gamuda said that it had not been notified of the termination and changes in the terms of the contract.

The JV also said that it had been engaged in discussions and negotiations with the MoF over the past two months to review the scope of works and specifications of the project with the aim of reaching a compromise on cost reduction.

“In respect of the underground works, MMC-Gamuda has so far offered a 24% reduction for the balance of the underground works,” it said.

In order to bridge the gap on the pricing, MMC-Gamuda had on three occasions in the last two months urged the MoF to appoint an international engineering consulting firm with the relevant experience to carry out an objective review looking into all reasonable engineering and technical requirements.

“The appointment of an international engineering consulting firm as proposed by MMC-Gamuda would greatly facilitate this exercise,” it added.

The companies said that the underground works was awarded to them in 2016 after an international competitive tender that, due to the challenging ground conditions, had stringent pre-qualification requirements with only five contractors being pre-qualified by MRT Corp Sdn Bhd to tender.

Of the five, MMC-Gamuda was the only local contractor, it said.

The bids were evaluated by the reference design consultant, Arup Singapore Pte Ltd, which was appointed by MRT Corp.

MMC-Gamuda said its bid scored the highest technical score and offered the lowest price.

The JV Co also listed several other reasons why the termination may not be the best solution.

Among them are:

> During the initial tender process, MMC-Gamuda had submitted a proposal with a lower cost without compromising the safety, performance and functionality of the operational railway. It said that however, MRT Corp opted not to accept the alternative offered by MMC-Gamuda. The reductions currently on offer to the MoF include some of these alternatives, but only those applicable to the balance of the underground works.

> There is a high risk of sinkholes due to tunneling through the city centre. MMC-Gamuda’s continued in-house developments and customisation of the tunnel boring machines is an integral part of managing this risk against sinkholes that proved successful in MRT Line 1.

> All 19 sites are active with 40% of the works completed. Two of the tunnel boring machines are already in operations with the balance being assembled and ready to mine from next month onwards.

> Job losses, of which MMC-Gamuda claimed some 20,000 personnel are involved in the underground works portion.

Source: The Star

https://www.thestar.com.my/business/bus ... V0IizVC.99

[winston]

vested

Gamuda: Loss of MRT tunnelling a big negative

Source: DBS

https://researchwise.dbsvresearch.com/R ... VyaWRAQA==

[winston]

not vested anymore

An open letter to MMC-Gamuda

by Tony Pua

1. The original Underground contract was awarded for RM15.49 billion. MRT Corp awarded additional RM1.2 billion of variation orders which resulted in the revised contract value of RM16.71 billion.

2. After numerous meetings and discussions, you wrote to the Minister on 15 August to offer a revised price of RM15.1 billion. This was mostly a result of shelving the 2 underground stations at Bandar Malaysia North and South.

3. Subsequently on 7 Sep, you offered to reduce the price further to RM14.58 billion for the Underground contract (making it RM32 billion for the entire MRT2 project). This represented a cost saving of RM2.13 billion or a 12.7% reduction. In the words of the Gamuda director at the meeting with the Minister on 4 Sep – “we offer what we can offer, but anything beyond that will be meaningless to continue”.

4. However, based on the study by the independent engineering consultant, MRT Corp should expect total savings between RM4.19 to RM5.79 billion for the estimated remaining 60% portion of works yet to be completed. Yes, this potential savings is just for the balance of works to be completed. Imagine the potential savings if it was for the entire contract.

Source: The Edge

http://www.theedgemarkets.com/article/o ... -mmcgamuda