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Kenanga Research maintains 'outperform' call on Gamuda
Published on: Saturday, August 11, 2018

Kuala Lumpur: Kenanga Research has maintained its "outperform" call on Gamuda Bhd with a lower target price of RM4.30, following news that the company's 40 per cent-owned associate, Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) had accepted a take-over offer from Pengurusan Air Selangor Sdn Bhd (Air Selangor) for RM2.55 billion.

In a statement on Friday, the research house said it lowered the target price to RM4.30 from RM4.35 after factoring in the lower-than-expected offer price into its valuation.

"We believe that after the resolution of the water saga in Selangor, Gamuda will be able to move on and focus on future projects like the Penang Transport Master Plan and the Mass Rapid Transit Line 3 (MRT 3)," it said.

On Monday, Kenanga said the RM2.55 billion offer from Air Selangor was a 26 per cent discount of the company's RM3.5 billion net book value as of December 2017 - a sweet deal for the Selangor state government.

However, it pointed out that the offer was higher than the previous RM250.6 million offer made back in 2014.

Moving forward, Kenanga said it did not expect any special dividend arising from the proceeds of the disposal, as it believed Gamuda might use it to pare down debts, bringing down its net gearing from 0.55 times to 0.42 times. "Its outstanding order-book comfortably stands at RM6.4 billion with a three-year visibility.

"As for its property division, the company saw RM1.9 billion in sales in the first half of 2018, bringing its unbilled sales to RM2.4 billion with a three-year visibility," it said.

Kenanga said the downside risks to its call included an unexpected delay of the MRT2 project, a deadlock in the SPLASH takeover deal, higher-than expected input costs and lower-than-expected property sales.

At 11.05am Gamuda's shares rose four sen or 1.07 per cent to RM3.75 from yesterday's close of RM3.71, with 1.29 million shares traded. – Bernama


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